Plenty of reports in recent years have noted the inadequacy of Americans' retirement savings.
But here’s some good news from Fidelity Investments, one of the country’s leading workplace-benefits providers and the No. 1 provider of individual retirement accounts.
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Its analysis of account balances for more than 45 million IRA, 401(k), and 403(b) retirement accounts showed all three categories increased in the second quarter. (403(b) accounts are like 401(k) accounts but for public-school and other nonprofit workers.)
IRA balances gained 5% from the first quarter to an average $113,800 in Q2. The average 401(k) balance climbed 4% to $112,400 and the average balance for 403(b) accounts ascended 5% to $102,400.
One element of the report that’s really exciting for some: They're now millionaires in their retirement accounts.
The number of 401(k) accounts with at least $1 million soared 11% in the second quarter from the first, to 378,000. The number of millionaire IRA accounts jumped 13% to 349,104.
Of course a million bucks ain’t what it used to be because of inflation. Indeed, $1 million now was only $762,000 10 years ago and $602,000 20 years ago.
Still, if you’re in the millionaire club, you still have something to feel good about. And if you’re not, you may be able to get there before you retire.
Fidelity’s Retirement Advice
Fidelity offers several recommendations to handle your retirement finances.
- First, “stay the course” in building your retirement savings, “even in good times,” it said. “The recent positive shifts in the [stock] market may represent an opportunity for some to pull money out to cover an outstanding expense.” But any money you take out of your retirement fund is money that’s not compounding tax-free. Fidelity suggests “taking a long-term approach to saving and avoiding making changes based on short-term economic swings.”
- Consider target-date investments. Target-date funds contain both stocks and bonds. They generally shift to a higher bond weighting as the fund moves closer to its target date. These funds “help keep investors on their savings track by preventing them from being too reactive to the market's twists and turns,” Fidelity noted. They also automatically rebalance between stocks, bonds and money-market funds. In the second quarter, more than half the investors in Fidelity’s survey held all of their savings in a target-date fund.
- Consider auto-enrollment in your company’s 401k plan. Fidelity’s data show that when participants are automatically enrolled in a plan, they are especially likely to remain enrolled.
- Leverage your employer’s match program. If your employer matches any portion of your retirement contributions, consider contributing at least up to the match amount, Fidelity said. This is free money.
- Start an emergency fund. Putting away money from each paycheck to protect against emergencies can provide big dividends if unexpected expenses pop up, Fidelity said. By having this money set aside, you won’t have to use a credit card or borrow against your retirement savings when emergencies occur.
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