The number of “401(k) millionaires” — 401(k) plan participants with balances of at least $1 million — has reached a record high, new data from Fidelity Investments shows.
As of June, there were roughly 497,000 so-called retirement-created millionaires in the U.S., according to the wealth management firm, which analyzed balances across 26,000 of its customers’ accounts. Nearly 399,000 Americans also have a least $1 million in an individual retirement account.
The key to stashing away such sums? Start early and contribute to your retirement plan consistently over many years, Fidelity said.
“This group is a great example because the average tenure is 27 years,” Michael Shamrell, vice president of workplace thought leadership at Fidelity, told CBS MoneyWatch. “They have seen a lot, and they are a great example of taking a longer-term approach to continuing to save and stay on track. That’s one thing that’s contributed to them hitting this savings level.”
Gen Xers, the generation closest to retirement, are making the biggest gains in saving for retirement, increasing their IRA contributions by 30% over the last year, Fidelity found. Contributions are the highest they’ve been in the last five years.
Yet while $1 million is an eye-catching figure, Shamrell noted that how much Americans need in retirement savings can vary drastically based on a number of factors, including where they reside.
Most Americans fall short
Although there are more 401(k) millionaires than ever, research shows that most Americans are woefully unprepared for retirement. Overall, the average 401(k) balance is just over $127,000, although that’s up 13% compared to a year ago, according to Fidelity.
The typical U.S. worker estimates needing savings of nearly $1.5 million to retire comfortably, according to an April survey by Northwestern Mutual.
At the same time, only 1 in 5 people who are 55-years-old have $447,000 or more saved for retirement, according to Prudential Financial data. And another recent study on Gen X’s retirement readiness found that half of those surveyed believe it would take a “miracle” for them to be able to retire.
Noted retirement expert Teresa Ghilarducci, a labor economist and a professor at The New School for Social Research in New York, also has noted the gap between rich and poor when it comes to retirement.
“At the lower end, the typical person has 12 years in retirement, and at the higher end the wealthy are retiring for about 20 years,” she told CBS MoneyWatch earlier this year.
