401(k) millionaire ranks grew 11.5% in 2023. They are 'poster children for staying the course,’ expert says (2024)

FAQs

401(k) millionaire ranks grew 11.5% in 2023. They are 'poster children for staying the course,’ expert says? ›

401(k) millionaire ranks grew 11.5% in 2023. They are 'poster children for staying the course,' expert says. Retirement 401(k) account balances bounced back in 2023 to the highest level in nearly two years, according to Fidelity's recent report.

You're not alone if your retirement account balances are far from the $1 million mark. While many people may aim for that goal, most don't reach it. Employee Benefit Research Institute (EBRI) data estimates that just 3.2% of Americans have $1 million or more in their retirement accounts.

Average 401(k) plan balances reached $134,128 in 2023, up from $112,572 in 2022 and down from $141,542 in 2021, according to Vanguard's “How America Saves 2024” report. While short-term market volatility is inevitable, it's important not to overreact to large swings in price.

How Long Will Becoming a 401(k) Millionaire Take? If you invested $23,000 into your 401(k) each year and earned a consistent 8% return each year, you'd achieve a plan balance of $1 million in slightly under 20 years. Note that this does not factor in a potential employer match.

Among the millions of retirement savers who hold accounts at Fidelity, the median 401(k) balance was $28,900 as of the first quarter of 2024, according to data the brokerage provided. That number may skew a little low, since many investors have multiple, small accounts from past employers.

Believe it or not, according to the 2022 Survey of Consumer Finances, only 9% of American households have saved half a million dollars or more for retirement. That's right, less than one in 10 families has reached this milestone.

The Reality of Million-Dollar Retirements

According to estimates based on the Federal Reserve Survey of Consumer Finances, only 3.2% of retirees have over $1 million in their retirement accounts. This percentage drops even further when considering those with $5 million or more, accounting for a mere 0.1% of retirees.

You can retire a little early on $400,000, but it won't be easy. If you have the option of working and saving for a few more years, it will give you a significantly more comfortable retirement.

According to estimates based on the Federal Reserve Survey of Consumer Finances, a mere 3.2% of retirees have over $1 million in their retirement accounts. The number of those with $2 million or more is even smaller, falling somewhere between this 3.2% and the 0.1% who have $5 million or more saved.

How long should $1000000 last in retirement? ›

For example, if you have retirement savings of $1 million, the 4% rule says that you can safely withdraw $40,000 per year during the first year — increasing this number for inflation each subsequent year — without running out of money within the next 30 years. Of course, the 4% rule isn't perfect.

Once you have $1 million in assets, you can look seriously at living entirely off the returns of a portfolio. After all, the S&P 500 alone averages 10% returns per year. Setting aside taxes and down-year investment portfolio management, a $1 million index fund could provide $100,000 annually.

As mentioned, $500,000 can last for over 30 years if budgeted correctly.

With the 4% Rule, you withdraw 4 percent of your portfolio value in the first year of retirement. The dollar amount of that withdrawal is then increased each year by the rate of inflation.

Positive Gains for Retirement Savers

Total average 401(k) savings rates reached a record high of 14.2%, driven by employee and employer 401(k) contributions that matched previous record levels (9.4% and 4.8%, respectively).

401(k) losses can happen for all kinds of reasons, from short-term market fluctuations to events like a recession. Market volatility is a normal part of investing. What matters most is staying invested and maintaining a diversified portfolio.

Many people consider it a benchmark for a comfortable retirement, but it's not necessarily enough for everyone. In fact, as the cost of living rises, many retirees will need far more than $1 million to live out their golden years comfortably.

The average age of the 401(k) millionaires is 59, but their wealth accumulation isn't just a function of time — it also stems from good investing practices.

There are estimated to be a little over 8 million households in the US with a net worth of $3 million or more.