Retirement savings: Money in accounts like IRAs, on average, now tops $100,000

'Retire Inspired' author Chris Hogan on Americans' concerns about the impact of recent market volatility on their retirement savings.

mericans may be turning into a nation of savers.

Fidelity Investments says that the average balance in its customers’ 401(k) and individual retirement accounts (IRA) accounts grew last year to least six figures, driven by a strong stock market and increasing contributions.

Fidelity said the average 401(k) balance rose to $104,300 at the end of last year, 13% higher than in the same period in 2016. Meanwhile, the average IRA balance climbed to $106,000, also a 13% year-over-year increase. That compares to the average 401(k) balance of $77,600 in the fourth quarter of 2012 and an average balance of $76,600 for IRA accounts in the same period in 2012.

Long-term 401(k) savers saw significant increases to their average account balance as well. For workers who have contributed to their retirement 401(k) for 10 consecutive years, the average account balance rose to $286,700, an increase from $233,900 from the year before. For those who have been in their 401(k) retirement plan for 15 consecutive years, the average balance rose to $387,100, up from $318,500 in the fourth quarter of 2016.

Furthermore, the number of savers with at least $1 million in their 401(k) account increased to 150,000 at the end of 2017, which is up from 93,000 a year ago, Fidelity said. The number of investors with $1 million in their IRA account climbed to 152,000, an increase from 109,000 at the end of 2016.

Fidelity found that nearly one third of 401(k) savers increased their savings rate last year, which rose to 8.6% in the fourth-quarter of 2017, a 0.2% increase from the prior year. The average IRA contribution rate increased to $1,730 in the last quarter of 2017, up from $1,590 the year before.

“It’s important for individuals to remember that saving for retirement is a marathon, not a sprint, and that applying a long-term approach to retirement savings strategy helps to put investors in a better position to reach their savings goals,” said Kevin Barry, president of workplace investing at Fidelity Investments.

In an effort to keep the progress on track and to help ensure investors aren’t over-exposed to a market downturn, the company recommends clients check the percentage of stocks within their retirement account. The company reasoned that although the rising stock market is one reason why the average retirement account balance has reached record levels, it may also result in some savers having more stock in their account than they feel comfortable with.

Fidelity also recommends investors “think twice” before tapping their retirement accounts — being aware of the potential downsides before taking out a 401(k) loan.

“For instance, the amount borrowed could miss out on potential market growth, and if someone leaves a job, the loan may have to be repaid in full in as little as 30 days,” the company said, adding that data it compiled found many investors choose to reduce their contribution rate when taking out this type of loan, which increases the negative impact on long-term savings potential.

The company also suggests people consider a “do it for me” investment option — such as a target date fund or managed account — which it says is an “increasingly popular way for individuals to leverage professional investment expertise to help them manage their retirement savings.”

“Fidelity encourages investors ‘stay the course’ when the stock market goes down, but the same approach applies when the market swings upward, as it did in 2017,” Barry said. “Most investors will likely see multiple periods of market volatility during their careers, so sticking to the retirement savings fundamentals can help keep them on the path to their retirement goals.

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