The fourth quarter of 2020 was a record-setter as millions of Americans saw their retirement savings reach record numbers. For a year that most people will equate to difficulty, struggle, and facemasks, the financial gains that many have made across the board might make up for some of that.
In fact, the number of IRA and 401(k) millionaires have also reached record numbers with the average 401(k) balance of those managed by Fidelity Investments hit $121,500. That’s an impressive 11% increase from the previous quarter, beating the firm’s former record of $112,300 from 2019’s fourth quarter. IRA balances also jumped in the 2020 fourth-quarter average by 9% to $128,100, increasing from third quarter averages of $117,700.
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Also jumping were the number of retirement savings accounts holding balances that exceeded $1 million. Millionaire 401(k) accounts topped 300,000, hitting a record total of 334,000. This marks an amazing 27% increase from the previous high ranking number of 262,000 millionaire 401(k) accounts in 2020’s third quarter.
Additionally, the amount of IRA millionaires soared to 288,000 as of the final day of 2020, toppling the prior high of 234,000, was set the prior quarter.
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Fidelity managed accounts noted that 401(k) accounts also saw a rise in pay contributed to those accounts by workers to a record 9.1%. It was a sign of good faith and trust in the system as Eliza Badeau, a Fidelity Investments vice president tasked with studying the investment behavior of members, noted, “Workers were not scared away by volatility.”
It appeared that despite the uncertainty and volatility of 2020, 33% of Fidelity’s 401(k) savers actually increased their retirement account contributions and resisted the urge to reach into their 401(k) accounts and IRAs. Even as new federal rules were passed waiving penalties for many early withdrawals, the company reported that 94% of those saving with Fidelity accounts did not take advantage of those early withdrawal incentives.
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Jealous of these numbers? Don’t be. Anyone with patience can find ways to save money for the future. The most advised plan? Start early and start now. A 25-year-old investing even just $75 per month can build up more capital by the time they hit 65 than if they started at 35 with a monthly $100 deposit. In fact, investing smaller dollar amounts over a longer time period can cause a greater impact on results than by investing a larger amount over a shorter period of time.
Above all else, recognize your goals and follow them. Knowing the amount you need to have saved will do more than just help you understand the reasons for your saving habits, but help you reach your retirement goal and beyond.
Sources: Investors.com, Merrill
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