Last quarter saw another all-time high in retirement-created millionaires, Fidelity Investments said Wednesday.
Fidelity released a second-quarter analysis that showed the number of 401(k)-created millionaires increased to 497,000, up 2.5% from the first quarter.
The number of IRA-created millionaires increased to 398,594, up 6% from the previous quarter.
Time and consistency by the savers were keys in reaching that milestone, Fidelity said.
Fidelity’s metrics come from an analysis of 24 million 401(k) participants.
“Depends on your lifestyle and cost of living and what other sources of retirement income you have,” Bankrate Chief Financial Analyst Greg McBride said. “At a 4% withdrawal rate, which even that might be on the aggressive side, a $1 million nest egg produces $40,000 a year in income. That’s pretax.”
Bankrate on Wednesday also published new survey results showing that the vast majority of Americans have financial regrets. The top overall regret was not saving for retirement early enough. That was mentioned by 22% of people in Bankrate’s survey.
“That is the most common regret, but it looms largest for Gen Xers and baby boomers,” McBride said.
Fidelity’s newly released retirement data showed the average 401(k) retirement account balance increased 13% over the last year to $127,100. The average balance for boomers was $242,200. The average balance for Gen Xers was $182,100.
McBride noted the averages can be skewed higher by those with very large balances.
“The majority may find themselves with a balance that’s well below that,” he said.
The burden of retirement savings is increasingly on the individual, according to McBride. Gone are the days of company pensions, at least for many Americans.
“Lifespans are getting longer, so the nest egg has to be bigger in order to last a longer period of time,” McBride said.
The Fidelity data, McBride did note, comes from a “self-selected group in the sense that not everybody has retirement accounts.”
A Census Bureau report from 2022 showed that just 58% of boomers and 56% of Gen Xers owned at least one type of retirement account. While the Department of Labor said last fall that more than a quarter of private industry workers with access to a defined contribution plan, such as a 401(k), did not participate.
Meanwhile, Americans’ household debt has continued its steady increase, now totaling $17.8 trillion. The personal saving rate — a percentage of disposable income — is a low 3.4%.
The personal saving rate averaged 6.2% from 2016 through 2019, before it spiked during the pandemic. But Americans have burned through a lot of their built-up savings.
Then there are the concerns over the future of Social Security. The Congressional Budget Office projects that under current law, Social Security will run out of reserves in less than a decade.
“That doesn’t mean there’s no money for retirees. But it does mean retirees can only get paid based on what’s currently coming in, which is the equivalent of a 23% across-the-board cut,” Marc Goldwein, senior policy director for the nonpartisan and nonprofit Committee for a Responsible Federal Budget said. “That’s about $17,400 per couple, for a typical couple retiring that year.”
Fidelity on Wednesday said the average 401(k) savings rate last quarter was 14.2%, which is very close to its suggested retirement savings rate of 15%. Retirement savers experienced the third quarter in a row of growth, according to Fidelity.
“Even if you don’t have a workplace-based retirement plan, if you or your spouse have earned income, you’re eligible to contribute to an IRA,” McBride added. “I would strongly encourage anybody that doesn’t have access to a workplace-based retirement plan to go the IRA route as a way to build retirement savings on the tax-advantage basis.”
McBride advises individuals should “focus on controlling what you can control” if they haven’t amassed a fortune for retirement yet.
“Are you saving 15% of your income for retirement? If not, that’s the level you need to get to,” he said. “Get to 10% right away and then stairstep it up from there.”