Positive Gains for Retirement Savers
Total 401(k) savings rates
Total average 401(k) savings rates held steady this quarter at 14.1%, driven by employee and employer 401(k) contributions (9.4% and 4.7%, respectively). This savings rate continues to be very close to Fidelity's suggested savings rate of 15% (this includes employee and employer contributions).
Average long-term balances
The average balance for 5-, 10- and 15-year continuous savers is also up for the third quarter, demonstrating the value of consistently contributing in the same plan for an extended period of time. Gen X4 savers in their plan for 15 years saw savings jump 6% from last quarter, with an average balance of $586,100 (compared to $554,400 last quarter), which bodes well for this generation as they approach retirement years.
Gen X sees growth in IRA contributions
Gen X continues to see gains in total IRA contributions, up 35% from Q3 of last year. An increasing number of Gen X accounts also received contributions during this quarter (up 23% from Q3 of last year).
401(k) and IRA-created millionaires
The number of 401(k)-created millionaires increased by 9.5% (544,000) from Q2 (497,000). Similarly, IRA-created millionaires increased by nearly 5% (418,111 vs. 398,594). Buoyed by market gains, these individuals are able to reach this level of retirement savings by starting early and contributing consistently over many years.
Spotlight: The “Cash-out” Conundrum
When employees with 401(k) savings “cash out” when changing jobs, the result is often unnecessary taxes and penalties, as well as the potential loss of retirement savings. As a result of SECURE 2.0 legislation, Fidelity collaborated with Retirement Clearinghouse to create a consortium of recordkeepers with the mission of accelerating the adoption of “Auto Portability,” an automatic rollover service for employees moving small retirement savings from one employer to another.
.
41%
Of workers typically “cash out”5
6,000+
Fidelity plans have adopted Auto Portability to date
2.2 million
Active Fidelity participants in the network
1Fidelity business analysis of 16.2 million IRA accounts as of September 30, 2024. Considers only active participants with balance.
2Fidelity Investments Q3 2024 401(k) data based on 26,000 corporate defined contribution plans and 24 million accounts as of September 30, 2024. These figures include the advisor-sold market but exclude the tax-exempt market. Excluded from the behavioral statistics are non-qualified defined contribution plans and plans for Fidelity’s own employees.
3Fidelity Investments Q2 2024 403(b) data based on 10,800 Tax-exempt plans and 8.9 million plan participants as of September 30, 2024. Considers average balance across all active plans for 6.37 million unique individuals employed in tax-exempt market.
4Generations as defined by Pew Research: Baby Boomers are individuals born between 1946 – 1964, Gen X are individuals born between 1965-1980, Millennials include individuals born between 1981 – 1996 and Gen Z includes individuals born between 1997 – 2012.
5University of British Columbia Sauder School of Business, “Cashing Out Retirement Savings at Job Separation,” November 2022.
