Millionaire millennials everywhere? New Fidelity survey highlights the status of retirement savers.
The pool of 401(k) millionaires, an all-time high, totaled 654,000 in September, up from 595,000 at the end of June, according to Fidelity Investments.
These gains reflect the robust record-high performance of the US market, with the S&P 500 (^GSPC) up 8.1%, the Nasdaq Composite (^IXIC) up 11.2%, and the small-cap Russell 2000 (^RUT) up 12.4% in the same period.
The biggest group of leapers to this lofty level — millennials, those between the ages of 29 and 44.
The new entrants are a significant increase when compared to the first quarter, when only 512,000 savers had at least $1 million in their nest egg, down from 537,000 at the end of last year.
“Historically the 401(k) millionaires have been Gen X and Boomers, but as they are now getting further in their careers, we’re starting to see millennials reach the million dollar milestone, which is an interesting change to note,” Michael Shamrell, vice president of workplace thought leadership at Fidelity Investments, told Yahoo Finance.
Read more: What is the average retirement savings by age?
The 401(k) data is based on Fidelity’s 26,000 defined-contribution plans at various companies across the country, covering 24.8 million participants, as well as 18.3 million IRA accounts and 403(b) data on 10,670 tax-exempt plans, covering 9.25 million participants.
According to the analysis, 3.7% of millionaires are millennials — an increase from 1.8% a year ago, Shamrell said. “If we round, the percentages of millionaires are: Boomers 36% (because they are now pulling from their retirement); Gen X 60%; Millennials 4%.”
Across the board, account balances clocked in at record highs with the average 401(k) balance of $144,400 and average IRA account balance of $137,902, both increasing 5% from the end of June.
For the first time, women’s average account balances crossed the half-million-dollar mark to $501,100, up 16.5% from a year ago. These were all long-term savers who have been in their 401(k) for 15 years continuously, Shamrell said.
Total average 401(k) savings rates of 9.5% and an average employer contribution rate of 4.7% held steady from earlier this year, putting the combination of employee and employer 401(k) contributions at a record high of 14.2%. Fidelity’s suggested savings rate is 15%.
Read more: How do millionaires make their money?
Small but mighty millionaires
To be fair, the number of millionaire savers swings with the market. And they compose a small percentage of Fidelity’s retirement savers..
When you pull back the cover, the record-high is not so effervescent.
Nearly 20% of Fidelity account participants have outstanding loans, up from 18.7% at this same time last year. And 2.8% took hardship withdrawals up from 2.6% at the end of June.
A withdrawal from your 401(k) account is typically taxed as ordinary income. Also, you’ll pay a 10% early withdrawal penalty before age 59½, unless you meet one of the IRS exceptions. These include certain medical expenses, qualified tuition payments, and up to $10,000 for first-time homebuyers. Some employer plans, too, will allow a non-hardship withdrawal.
While I’d be foolish to crystal ball how millionaire row will look for these retirement savers at year-end, it’s clear that millennials have finally been admitted to the club.
Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including “Retirement Bites: A Gen X Guide to Securing Your Financial Future,” “In Control at 50+: How to Succeed in the New World of Work,” and “Never Too Old to Get Rich.” Follow her on Bluesky.
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