Strong growth in the stock market this year has led to significant gains for savers with retirement accounts. According to data from Fidelity Investments, the average 401(k) plan balance reached $127,100 at the end of the second quarter, marking a 13% increase from the same period last year. This growth follows a 16.4% jump in balances from the previous year.
Retirement savers in the second quarter of 2024 benefited from the continued upswing of the previous quarter, with contribution levels and average account balances reaching record highs, noted Fidelity Investments.
While the average 401(k) balance saw a notable increase, the median balance stood at $29,200 at the end of the second quarter, reflecting a 17% rise from a year earlier. The median figure tends to be lower due to workers who recently enrolled in a 401(k) plan and have not yet built up a substantial balance.
Approximately 35% of Americans reported having a 401(k) or similar retirement savings plan in 2020, as per the Census Bureau. Individual retirement accounts (IRAs) also experienced growth, with the average balance reaching $129,200 by the end of the second quarter, up 14% from the same period last year.
The surge in retirement savings plans coincided with the stock market's strong performance, driven by record highs in major stock indexes. Enthusiasm over artificial intelligence developments boosted demand for shares in Big Tech companies like Nvidia, Meta Platforms, Microsoft, and Amazon.
The S&P 500 index saw a significant rally, posting a gain of approximately 15% in the first six months of the year. As of the latest data, the index has increased by another 2.4%, bringing the total gain to around 17%.
The savings rate, a combination of personal savings and employer contributions, played a crucial role in boosting 401(k) plan balances. Fidelity reported a savings rate of 14.2%, slightly down from the first quarter but higher than the rate in the same period last year.
Despite the positive trend in retirement savings, some savers are tapping into their nest eggs early. Fidelity noted that 18.3% of employees with a 401(k) plan had a loan outstanding on their retirement account balance in the second quarter, up from the previous year.
