With the stock market’s gains propelling retirement account balances to latest highs, a record variety of savers can now call themselves 401(k) millionaires.
A record 544,000 401(k) accounts had balances of $1 million or more as of the tip of the third quarter (July through September), based on latest data from Fidelity. That is a jump of 9.5% from the previous quarter (April through June).
“We’re continuing to watch a dedication to saving for retirement, with contributions to those vehicles holding regular,” Sharon Brovelli, Fidelity’s president of workplace investing, said in a news release.
The common 401(k) account balance in Fidelity’s dataset of 24 million retirement savers was $132,300 within the third quarter, up 23% from a 12 months earlier.
Older staff typically save at the best rates, but starting to avoid wasting for retirement at a young age is significant. Young staff profit from a protracted time horizon that permits their contributions to extend in value.
Listed below are the common 401(k) balances by generation, based on Fidelity:
- Boomers: $250,900
- Gen X: $191,900
- Gen Y: $66,500
- Gen Z: $13,000
Fidelity says account balances have been buoyed by market gains this 12 months. Because the end of the third quarter, the stock market has risen further, suggesting that savers’ 401(k) balances — and the variety of millionaires — continues to climb.
Becoming a 401(k) millionaire is doable but takes dedication
Accumulating a balance of $1 million is a significant accomplishment in retirement planning. It typically takes consistent saving — and a protracted time horizon — to realize the milestone.
The annual maximum 401(k) contribution for 2024 is $23,000, or $30,500 for those who’re above the age of fifty. In 2025, the contribution limit will go up $500 for many savers, although a latest rule allowing “super” contributions will allow some older staff to stash away nearly $35,000.
Contributing pre-tax dollars to a 401(k) account has multiple advantages. Since 401(k) contributions are tax-deferred, you reduce your taxable income every 12 months you contribute. This lowers the quantity you pay in taxes and might potentially drop you right into a lower tax bracket, as well. You sometimes don’t pay any taxes until you withdraw funds in retirement. Since most individuals’s incomes drop after they retire, which means that you will likely be in a lower tax bracket by the point you tap your 401(k).
As the 12 months nears its end, it’s time to review your 401(k) savings and take into consideration your savings goals. Should you have not hit your annual limit and have the desire to make additional contributions, it is best to contact your organization’s payroll department now.
When you needn’t max out your contributions to change into a 401(k) millionaire, saving portion of your earnings frequently and profiting from available employer matches are among the many keys to success.
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