The number of retirement millionaires jumped in the second quarter as improving market conditions and steady contribution rates helped shore up balances, Fidelity Investments said.

Fidelity saw a 10% increase in millionaires holding 401(k) accounts to 378,0000 in the second quarter, compared with 340,000 in the first quarter. Among individual retirement accounts (IRAs), Fidelity reported a 13% increase in millionaires – 349,104 in the second quarter compared with 307,623 in the first quarter.

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This jump came as average retirement account balances increased for the third straight quarter, said Fidelity, based on an analysis of savings behaviors and account balances for more

than 45 million IRA, 401(k), and 403(b) retirement accounts.

The average IRA balance was $113,800 in the second quarter, a 5% increase from the first quarter. Longer term, those balances were up 7% from five years ago and 41% increase from 10 years ago. 

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For the average 401(k) balance, totals increased to $112,400, up 4% from the first quarter of 2023, up 8% increase from five years ago and 39% increase from 10 years ago, Fidelity said.

“We are pleased to see a third straight quarter of positive gains for retirement savers as the market continues to improve and both employees and employers commit to establishing a strong financial future,” said Kevin Barry, president of workplace investing at Fidelity Investments. “As we begin to see improvements in market conditions, maintaining high contribution and savings rates is an essential component of improving one’s retirement readiness.”

The S&P 500
is up about 16% so far this year. 

In the second quarter, Fidelity said 401(k) account balances increased across every generation, with average 401(k) balances up by double digits over the year-ago second quarter for Generation Z, millennial and Generation X workers: Gen Z saw a 66% increase, Millennials saw an increase of 24.5%, and Gen X savers increased 14.5%. Boomers’ balances also increased by 6.3%.

The total savings rate for the quarter, which reflects a combination of employee and employer 401(k) contributions, was 13.9%, mirroring the savings rate of the second quarter of 2022. This is slightly lower than first quarter’s 14% rate, but higher than the previous quarters (13.7% in the fourth quarter of 2022 and 13.8% in the third quarter of 2022). Fidelity’s suggested savings rate is 15% (including both employee and employer contributions). Boomers in the workforce continue to save at the highest levels (16.6%).

Overall, the number of IRA accounts continues to increase, especially for young investors.

The total number of IRA accounts rose to 14.3 million, an 11% increase over the second quarter of 2022 and total assets have grown 14.3% this past quarter. 

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Young investors (age 18-35) continue to take control of their retirement savings, with a 34.4% increase in IRA accounts year-over-year across this age group and a 34.8% increase for females in this age bracket. Across generations, Roth IRAs continue to be the retail retirement savings vehicle of choice, with 59.1% of all IRA contributions going to Roth in the second quarter.

“I am so encouraged to see the leaps young investors are making when it comes to their retirement savings, across both 401(k)s and IRAs,” said Joanna Rotenberg, president of personal investing. 

“Investing at a young age not only allows your money the opportunity to grow to a level that will have a major financial impact on your future, but also presents an opportunity to learn about investing, try new things, and ultimately set yourself up for a successful financial future,” Rotenberg said.

Average long-term balances for 5-, 10- and 15-year continuous savers saw double-digit increases in their balances in the last year. Those who have been focused on consistently saving over the long term benefited the most from three quarters of growth.

In fact, Boomers saving in their 401(k) plan continuously since 2008 now have an average balance of just under half a million dollars ($499,700), Fidelity said.

Read: What’s your retirement ‘number’? How to figure it out.

Outstanding 401(k) loans increased slightly, Fidelity said. The percentage of participants with a loan outstanding increased slightly to 17.1% in the second quarter, compared to 16.6% in the first quarter, which was an all-time low. The percentage is also well below the number of outstanding loans observed prepandemic, Fidelity said.

Going forward, Fidelity had a note of caution due to the pending repayment of student loans.

With 43 million Americans set to begin repaying student loans once again in October, the impact to retirement savings is top of mind for many clients. 

According to Fidelity’s data, many student loan borrowers used the payment pause to focus on retirement savings, with 72% of student loan borrowers contributing at least 5% to their 401(k), compared to only 63% prior to the payment pause. Additionally, there has been a 5.8% decrease in student loan borrowers with a loan out against their 401(k) during the pause (13.1% compared to 18.9% previously).

To ease the mounting financial burden on borrowers, many employers are stepping in to help by integrating workplace benefits that make it easier for employees to save for retirement while paying down student loan debt at the same time. 

Currently, 55% of employers either offer or plan to offer a student debt benefit, which can have a profound impact on financial wellness: in fact, workers enrolled in a student debt retirement option are projected to be able to nearly double their 401(k) balances by age 65, Fidelity said.

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