Number of 401(k) and IRA millionaires hit new record in 2020
A record-breaking number of retirement savers became millionaires last year, according to a new tally from Fidelity Investments.
In the fourth quarter, 334,000 401(k) accounts at Fidelity had balances of $1 million or more, growing 27% from the third quarter when the previous record was reached, according to an analysis of more than 30 million retirement accounts at Fidelity provided exclusively to Yahoo Money.
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The number of so-called IRA millionaires also jumped by 23% to 288,000 accounts from the previous quarter, also when the prior record was made.
“Given the pandemic, people might find this to be shocking,” Eliza Badeau, vice president of thought leadership at Fidelity, told Yahoo Money. “In the fourth quarter of 2020… we saw about 95% of that increase due to [stock] market activity, but we are continuing to see positive saving behaviors.”
The 401(k) holders who have created substantial nest eggs have benefitted from a strong stock market, leveraged company matches, and contributed at least 15% of their annual take-home pay, according to Badeau. They likely didn’t face employment disruptions during the pandemic, either.
“People are realizing that it is truly on them and any employer-sponsored plan to get them ready to prepare to retire,” she said.
Retirement account balances saw a boost
The average balances for 401(k), IRA, and 403(b) accounts also reached record highs, as did contributions. IRAs and 403(b)s saw double-digit percentage growth from 2019 to 2020 with the average balance growing by 11% to $128,100 and 10% to $106,100, respectively. The average 401(k) saw a more modest uptick of 8% to $121,500.
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About 9 in 10 Fidelity investors also didn’t withdraw from their accounts, meaning the majority of people eschewed the CARES Act provision of penalty-free early withdrawals from retirement savings accounts.
Contributions saw an uptick
Across the board, retirement investors were able to boost their contributions. With assistance from employer-matching programs and features like auto-enrollment and auto-increases, people become more motivated to take further action once they see their money grow, Badeau explained.
“Employers are very focused on providing benefits that will help people get to their retirement successfully,” she said.
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For 401(k) savers, 1 in 3 increased their contribution rate at some point in 2020, while IRA account holder contributions increased by 35% last year.
“People [are] seeing the importance of needing to save on their own,” Badeau said, “versus relying on something like a pension plan.”
Stephanie is a reporter for Yahoo Money and Cashay, a new personal finance website. Follow her on Twitter @SJAsymkos.
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