Please click on the above chart to enlarge. From Fidelity's
press release:
- Average individual 401(k), 403(b) and IRA account balances bounce back from dip in Q1, show solid year-over-year growth. The average 401(k) balance increased to $104,000, just under the all-time high balance of $104,300 from Q4 2017. The average balance represents a one percent increase from last quarter and a six percent increase from one year ago. The average IRA balance increased to $106,900, almost a two percent increase from last quarter and almost a seven percent increase from Q2 2017. The average 403(b) account was $83,400, almost a two percent increase from Q1 2017 and a five percent increase year-over-year.
- Number of 401(k) and IRA millionaires continues to increase. The number of people with $1 million or more in their 401(k) increased to 168,000 at the end of Q2, an increase of 49,000 from Q2 2017. In addition, the percentage of 401(k) millionaires who are women increased to more than one in five (21 percent). Among IRA holders, the number of clients with $1 million or more in their account reached 156,000 at the end of Q2, 26 percent of which were women.
- Fidelity's Q2 analysis also examines how auto enrollment (AE) has impacted savings behavior and plan design since 2008. As of the end of Q2, 33 percent of Fidelity's 22,600 401(k) plans auto enroll new employees, more than double the percentage (15 percent) that auto enrolled employees in 2008. And among the largest 401(k) plans (companies with more than 50,000 employees), 61 percent automatically enroll new employees.
- Employees who are automatically enrolled tend to save more. Since 2008, the average savings rate among employees who were automatically enrolled in their 401(k) has increased from 4.0 percent to 6.7 percent. Also, workers who are auto enrolled don't necessarily "set it and forget it" – over the past 10 years, nearly two-thirds (63 percent) of auto enrolled employees have increased their savings rate.
- More millennials4 using IRAs for retirement savings. Among IRA holders, millennials continued to utilize both Traditional and Roth IRAs for retirement savings in Q2. The average IRA balance for millennials increased nine percent in Q2 2018 to $15,150, and number of millennials making contributions increased 19 percent over a year ago. Roth IRAs continued to be a popular investment option for millennials, as 75 percent of IRA accounts that received a contribution from a millennial in Q2 were Roth IRAs, representing more than two thirds (69 percent) of millennials' contribution dollars.
With balances near record highs in American retirement accounts, I'm reminded of a blog post from June written by Ben Carlson for his blog
A Wealth of Common Sense. Please read his post
Why the Next Bear Market May Feel More Painful. Ben analyzes the impact a negative market could have on a hypothetical Millennial, Generation X and Boomer portfolio. He points out that investors could loose more money with a smaller percentage decline due to rising balances over the last decade. The math is obvious, but the timing might serve as a positive reminder to many investors to make sure they are updating and following their financial plan.
