Retirement account balances have surpassed pre-COVID highs and produced a record number of millionaires thanks to the market’s recent run-up.
After taking a sharp dive amid the coronavirus outbreak a year ago, retirement accounts have bounced back entirely, according to Fidelity Investments, the nation’s largest provider of 401(k) savings plans.
The number of Fidelity 401(k) plans with a balance of $1 million or more jumped to a high of 365,000 in the first quarter of 2021, according to CNBC.
The number of IRA millionaires increased to 307,600, also an all-time high.
The combined total number of retirement millionaires has more than doubled from a year ago.
Even 3 days of losses this week has not altered the retirement accounts’ resurgence.
The S&P 500 has had an annual return of more than 20% from January 2020 to the beginning of this month, according to Morningstar Direct.
That has helped average retirement account balances to reach record levels, surpassing even the previous highs that occurred right before the pandemic.
Consistent saving, employer contributions, and stock market performance helped boost account balances, according to Fidelity. IRAs also were helped by some individuals making tax-deferred contributions before the tax deadline.
Fidelity reported the average balance of a 401(k) account reached $123,900 in the first quarter of 2021.
About 17% of workers increased their contributions during this time – more than any previous quarter – and a record 37% of employers automatically enrolled new workers in their 401(k) plans.
Only 2.4% of workers made a withdrawal during that period from their 401(k). That was down from 6.1% at the end of 2020.
"The first quarter of last year was a difficult time for many as the effects of the pandemic started to impact the global business landscape," said Kevin Barry, president of Workplace Investing for Fidelity Investments, according to BenefitsPRO.
"While the stock market’s recent performance provided a boost to retirement savings balances, individuals can’t control how the market performs from quarter to quarter or year to year. What they can control is establishing and sticking to consistent, positive savings behaviors. This behavior is important to putting investors on the right track to reach their long-term retirement savings goals."
Individual retirement account balances also grew, reaching an average of $130,000. That was aided by a spike in tax-deferred contributions ahead of the May 17 tax filing deadline.
Fidelity Investments Vice President Jessica Macdonald said IRA account holders who have hit the $1 million mark likely are putting away much more than the average combined employee and employer contribution rate of nearly 14% and over a longer period.
"These are people making it a goal to do as much as possible with these retirement accounts," Macdonald said. "It’s not something that happens overnight, it’s really an example of staying the course and taking a long-term approach."
Macdonald added those account holders also tend to hold more equities, which have performed particularly well over the last year.
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