Gen X savers keep an average 401(k) balance of $543,400

Some super-savers in Generation Generation X – those born between 1965 and 1980 – are looking at staggering amounts in their 401(k) plans, the kind of money that closely matches the 401(k) balances for some super-saver baby boomers.

It’s true that not every Gen X member has money for retirement. We’re talking about long-term savers who consistently set aside significant amounts of their paychecks into 401(k) plans for 15 consecutive years. These savers are individuals who have been in the same Fidelity-managed 401(k) plan, with the same employer, for a long period of time, according to the latest Fidelity Investments survey released Thursday.

After all these years of saving, this group of Gen Xers is expecting, on average, more than half a million dollars.

Over the long term, Gen X savers have average balances of $543,400 on their 401(k) statements, according to first-quarter retirement savings data from Fidelity Investments. Data does not reflect the entire 401(k) universe, but is based on 401(k) plans managed by Fidelitywhich is the largest 401(k) platform in the country.

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Long term baby boomer savers – those born between 1946 and 1964 – have average balances of $543,200.

So Gen Xers are earning an extra $200 over baby boomers. It’s the first time Gen Xers in the long-term saver pool have surpassed boomers’ rolling 15-year balances.

Well, here’s an important reality check: Many of these boomers are already retired and are spending their retirement savings. And many Gen Xers are getting older and approaching retirement, so some are saving even more aggressively, said Michael Shamrell, vice president of thought leadership for workplace investing at Fidelity.

Individuals aged 50 or over – the oldest of Generation X turns 59 in 2024 – can contribute an extra $7,500 in 2024 to your 401(k) plans. This is in addition to the maximum employee contribution of $23,000 to 401(k) plans for 2024.

The oldest boomers turn 78 this year and are typically well retired. The baby boomer group will be between 60 and 78 years old when their birthdays are in 2024.

Some baby boomers, Shamrell said, may still be working and are saving aggressively. But many retired baby boomers may be pulling out savings and spending their money on retirement. Some may also have transferred money from some 401(k) plans to other savings, including out-of-plan annuities, to provide an income stream in retirement.

Many retirees in their 70s must withdraw at least some money from retirement savings to resolve complex problems.minimum distribution rules required each year. The minimum amount required reflects age and retirement savings. And retirees can withdraw more than the minimum.

The story continues

In 2020, the reference age to begin taking required minimum distributions changed to 72 from 70 and a half. The SECURE Act 2.0 subsequently raised the age for required minimum distributions generally to 73 for those who turn 72 in 2023 and later. If you reach age 73 in 2024, the IRS notes, the required start date for your first RMD is April 1, 2025, for 2024. Additionally, Roth 401(k)s no longer have RMDs, starting this year .

Starting in 2033, the RMD age will increase to 75 years.

Fidelity research indicated that only 20% of retirees with money in a 401(k) made withdrawals in 2023. And, Fidelity noted, 94% of retirees age 73 and older who had money in a 401(k) made withdrawals in 2023.

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A big rally in stocks boosted 401(k) plans

The march towards Dow 40,000 – the Dow Jones Industrial Average reached its record high of 40,003.59 points on May 17 – has put many people on a better financial path.

Of course, we may be dealing with what many are now calling “Vibecession” – where many feel pessimistic about the economy, higher prices and, yes, express anxiety about their jobs and financial futures.

In general, though, the jobs numbers and much of the 401(k) data say otherwise.

“The numbers, overall, we think are very encouraging,” Shamrell said.

He noted that total 401(k) savings rates hit a record high of 14.2%, driven by employee and employer contributions.

The average 401(k) retirement account balance reached $125,900 in the first quarter of 2024, a 6% increase from the fourth quarter of last year, based on data from Fidelity. The average increased 16% compared to the first quarter of the previous year.

First quarter data is based on 23,900 corporate defined contribution plans and 23.3 million participants in these plans managed by Fidelity as of March 31.

Which could be a sign of anxiety and financial stress: 17.8% of workers had a 401(k) loan in the first quarter of 2024, compared to 16.7% in the first quarter of the previous year. Even so, this represents a drop from 19.9% ​​in the first quarter of 2019.

While the 401(k) has many critics – asked the New York Times’ “The Daily” podcast last week “Was the 401(k) a mistake?”. – those who have saved aggressively have not been afraid to open their 401(k) statements recently.

For baby boomers, the average balance was $241,200 in Fidelity 401(k) plans.

For Gen X employees on Fidelity plans, the average balance was $178,500.

For millennials, born between 1981 and 1996, the average balance was US$59,800.

For Gen Z, those born between 1997 and 2012, the average balance was $11,300.

Gen Z is just beginning their careers, with the oldest members being 27 years old.

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We’re still looking at far fewer than a million 401(k) millionaires

Only a small fraction of people can boast a seven-figure 401(k). But it’s a figure that speaks when Fidelity releases these numbers to its participants.

During the first quarter, 401(k) millionaires reached an all-time high of 485,000 savers, according to Fidelity. It is a 15% increase compared to the fourth quarter of last year. And, even more surprising, it is a 43% increase compared to the previous year.

Want a really weird statistic? Let’s go back a little over six years ago, when about 150,000 people had $1 million or more in their 401(k) balances at Fidelity Investments in the fourth quarter of 2017. It was a record number at the time, up from 93,000 people in the same period in 2016.

Typically, 401(k) savers achieve millionaire status if they start saving early in their working years and continue to contribute consistently as much as possible, year after year after year. Many do not panic and abandon the market during an economic crisis. And typically, they don’t borrow frequently from their 401(k) plans. It can also help when you work somewhere with a generous employer.

Many 401(k)-generated millionaires took steps to set aside a greater percentage of their income for retirement as they continued to work.

In the first quarter, for example, Fidelity noted that 401(k) millionaires have been saving in their plans for an average of 26 years and have an average contribution rate of 17%.

Many have seen – and apparently survived – some pretty brutal moments for the stock market during those 26 years – the implosion of the dot.com bubble in 2000, the stock market crash after the 9/11 terrorist attacks, the financial collapse of 2008, and the turmoil on Wall Street in the early days of the COVID-19 pandemic in 2020.

But many continued to save consistently and didn’t try to time the market. “If people keep this up, they will stay on track to achieve their goals,” Shamrell said.

Research shows that only 30% of small businesses offer retirement savings benefits, Fidelity noted. But Shamrell said small businesses that offer retirement savings options see strong participation. The average retirement balance at small businesses with Fidelity plans is $152,000.

The amount employees save may also vary by industry, perhaps reflecting trends in how much workers are paid in that industry, corresponding contributions, and the age of the workforce. Again, these balances reflect companies in industries that have their 401(k) with Fidelity.

The average 401(k) balance in the automotive industry, according to Fidelity data, was $110,400.

The average balance in computer and electronics manufacturing was $204,500. The average construction balance was $87,100.

In media and entertainment, the average balance was US$124,300. At retail, the average balance was $51,200.

Some industries, like retail, Shamrell said, tend to have lower 401(k) balances because a younger workforce tends to change jobs more frequently.

The 401(k) is not a theoretical exercise, especially as millions of savers approach retirement age.

About 4.1 million Americans are expected to turn 65 in 2024, a record number. Many in this age group do not have traditional pensions and will tap into their savings.

Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on X (Twitter) @drowsiness.

This article originally appeared in the Detroit Free Press: 401(k) Millionaires Hit Record Numbers in Q1