Strong growth for stocks on Wall Street this year have helped juice gains for savers with retirement accounts.
The average 401(k) plan balance stood at US$127,100 at the end of the second quarter, an increase of 13 per cent from the same period last year, according to data from Fidelity Investments drawn from 24 million accounts.
The average balance in the quarter was up just one per cent from the first three months of the year, when the average 401(k) balance jumped 16.4 per cent from a year earlier.
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“Retirement savers in the second quarter of 2024 benefited from the continued upswing of the previous quarter, when contribution levels and average account balances reached record highs,” says Sharon Brovelli, president of workplace investing at Fidelity Investments.
The median 401(k) plan balance was just $29,200 at the end of the second quarter, an increase of 17 per cent from a year earlier. About 35 per cent of Americans reported having a 401(k) or similar retirement savings plan in 2020, according to the Census Bureau.
Individual retirement accounts, or IRAs, also rose. The average balance was $129,200 by the end of the second quarter, an increase of one per cent from the first quarter and up 14 per cent from the second quarter last year, Fidelity said.
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The retirement savings plans’ gains came as the major stock indexes crushed multiple record highs amid a wave of enthusiasm over artificial intelligence developments that fueled demand for shares in big technology stocks, including Amazon.com Inc., Meta Platforms Inc., Microsoft Corp. and Nvidia Corp.
The savings rate, or how much savers set aside from their pay combined with contributions from their employer, also helped push up 401(k) plan balances. The savings rate was 14.2 per cent, Fidelity said. That’s down slightly from 14.1 per cent in the first quarter but higher than the 13.9 per cent rate in the second quarter of last year.
For many savers, their growing nest eggs are proving too tempting not to tap early. Some 18.3 per cent of employees with a 401(k) plan had a loan outstanding on their retirement account balance in the second quarter, Fidelity said. That’s up from 17.2 per cent in the same quarter last year.
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