Check Your Statements–There Are Record High 401(k) Savings in 2024

June

Check Your Statements–There Are Record High 401(k) Savings in 2024

June 17, 2024

Fidelity Investments recently released a report on 2024 trends, and Q1 shows record high 401(k) savings in 2024.
Read on to discover more about the current 401(k) savings rate, why rates have increased, and how you can save even more.

Record High 401(k) Savings

record high 401(k) savings

According to Fidelity’s Q1 2024 Retirement Analysis, “Total average 401(k) savings rates reached a record high of 14.2%. […] This savings rate is the closest it has ever been to Fidelity’s suggested savings rate of 15% (this includes employee and employer contributions).”¹

Fidelity analyzed approximately 26,000 corporate 401(k) plans and 24 million plan participants.

The report revealed that “employees deferred an average of 9.4% of their income during the first quarter, and companies contributed an average of 4.8%, including matches, profit sharing and other deposits.”²

Experts believe this record high 401(k) savings is due to two factors – automatic 401(k) plan enrollment and automatic contribution increases.

Additionally, auto-enrollment for many participants is set to a higher savings rate than before.

Fidelity found, “While the default contribution rate for such auto-enrolled 401(k) plans was 4.1% last quarter, nearly 40% of auto-enrolled plans started employee deferrals at 5% or higher.”³

Not only are many auto-enrollment plans set at a higher contribution rate, but many are also designed to automatically increase by 1 percentage point each year.

This is often referred to as auto-escalation.

Consider this information about auto-escalation from an annual survey by the Plan Sponsor Council of America.

About 64% of companies with a 401(k) plan automatically enrolled workers in 2022.
Of those companies, 78% also automatically increased workers’ savings.
Most, or 84%, of these 401(k) plans raise workers’ savings rate by 1 percentage point a year.⁴

This tracks with Fidelity’s recent survey.

Mike Shamrell with Fidelity explains, “More than 33% of plan participants increased 401(k) contributions at the end of 2023 – and about three-quarters of those increases were automatic adjustments.”⁵

Were you auto-enrolled in your company’s 401(k) plan?

What was your original contribution rate? Has it increased without your knowledge?

Review your 401(k) statement to find out!

Overall Savings Records

record high 401(k) savings

The good news continues – especially for long-term savers and younger plan participants.

Fidelity reports, “The average balance for 5, 10 and 15 year continuous savers increased this quarter, with 15-year savers seeing a 7% increase in their account balances, demonstrating the value of consistently contributing in the same plan for an extended period of time.”⁶

When it comes to long-term savers, Gen X participants have surpassed Boomers.

According to Fidelity, “The 15-year continuous balance for Gen X4 participants ($543,400) surpassed the 15-year continuous balance for Boomers4 ($543,200).”⁷

Younger plan participants are also embracing saving more.

Fidelity reports, “The number of Gen Z Roth IRA accounts increased 71% in Q1 2024 compared to Q1 2023, with average contributions increasing by 11.1%.”⁸

Speaking of the record high 401(k) savings rate, this is a good time to remind you that Fidelity also reported that there are more 401(k) millionaires than ever before just a few months ago.

4 Ways to Save Even More in 2024

record high 401(k) savings

Americans are recognizing that retirement isn’t cheap and are making an effort to boost 401(k) savings.

As great as auto-escalation is, you should take an active role in saving more.

The goal of auto-escalation is to boost 401(k) savings for workers who do not take action on their own.

But don’t let your savings stop there. Follow these four steps to save even more in 2024.

#1 Contribute More

The best way to boost your 401(k) savings is to contribute more.

Don’t rely on your plan’s possible auto-escalation.

If your plan does offer auto-escalation, it escalates slowly.

You need to boost your contributions on your own – even a small bump in your contributions may make a significant difference.

Consider this example.

Let’s say you make $75,000 a year and contribute 6% to your 401(k) plan. This equals $4,500 a year (or $187.50 per paycheck twice a month).

If you bump your contributions to 7%, you’ll save $5,250 a year (or $218.75 per paycheck twice a month).

Your goal should be to contribute at least enough to receive the company match.

Don’t miss out on free money!

Additionally, look for opportunities to maximize your regular contributions to take advantage of tax-deferred growth.

For example, if you’re 50 or older, utilize catch-up contributions to increase your savings rate.

#2 Rebalance Your Account

Rebalancing is the process of realigning the weightings of your portfolio’s assets (investments) to stay in line with your risk tolerance and retirement timeline.

This means periodically buying or selling assets in your portfolio to maintain the initial desired level of asset allocation.

Rebalancing today may give you opportunities to boost your 401(k) – and help protect you from potential losses.

Ideally, you should rebalance your 401(k) as needed throughout the year.

#3 Educate Yourself

Don’t think of a 401(k) as something that is hands-off.

401(k) millionaires are very much hands-on.

If you want to boost your 401(k) savings, you must educate yourself.

Learn how to read your 401(k) statements.

Ask HR or your plan provider questions about the specifics, such as fees and vesting schedules.

Review your investment choices and take advantage of growth opportunities.

Subscribe to our 401(k) blog, listen to financial podcasts, and watch YouTube videos from trusted financial experts.

Stay engaged with your 401(k).

#4 Get Help

If you’d like to take control of your financial future and potentially have more income at retirement, we strongly suggest getting third-party advice.

If you’re hesitant to reach out for advice because you think your account balance isn’t big enough, or you think you’re too close to retirement to get help, don’t let that stop you!

401(k) Maneuver provides professional account management with the goal to help you grow and protect your 401(k).

Our goal is to increase your account performance over time, manage downside risk to minimize losses, and reduce fees that harm your account performance.

There are no time-consuming in-person meetings and nothing new to learn, and you don’t have to move your account.

Simply connect your account to our secure platform, and we regularly review and rebalance your account for you, when necessary.

If you have questions about your 401(k) or if you need help, we’re here for you. Click below to book a complimentary 15-minute 401(k) Strategy Session.

Book a Call

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