The number of 401(k) and IRA millionaires plummeted last year as retirement savings took a hit
Last year, the market was so bad that the percentage of investors with at least $1 million in 401(k) funds and their IRAs fell nearly 30% from 2021, according to data provided by Fidelity Investments. .
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Of the more than 35 million retirement accounts that Fidelity manages, there were 299,000 401(k) millionaires and about 280,300 IRA millionaires in the fourth quarter of 2022. This compares to 442,000 and 376,000 for the same period in 2021, respectively. This is also down from the end of 2020, when Fidelity reported 334,000 401(k) millionaires and 288,300 IRA holders with seven-figure accounts.
It is possible that some people have multiple accounts at Fidelity, so the actual number of those investing at least $1 million in retirement may be higher. But overall, the drop isn’t all that surprising, given that the S&P 500 has about 20% off last year. At the same time, many households, struggling with rising living costs, have to save up to pay their monthly bills.
Although the number of million dollar funds is decreasing, it is also far from normal. The average IRA balance was $104,000 at the end of 2022—a 20% decrease from 2021—while the average 401(k) balance was $103,900. individual Report from Vanguard also find that the average 401(k) balance reduced by about a fifth in 2022.
A positive development? Gen Z has prioritized saving for retirement. The average account balances of these young workers have grown 14% since the end of 2021. Their account balances are still small for their age, but the wobbly stock market hasn’t stopped them. They start investing at a young age.
While all savers are facing tough market conditions, that doesn’t seem to stop them from investing in their retirement accounts. More than a third actually increased their contribution rate last year, with the average 401(k) account holder increasing their contribution rate by 2.6%.
A $1 million retirement fund has long been a goal of savers. But some financial advisors now say that some people should save over 1 million dollars for a comfortable retirementdepending on where they live, their lifestyle and other goals.
This story was originally featured on Fortune.com
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