There is now a record number of 401(k) and IRA millionaires in the US, according to Fidelity

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A pedestrian walks past a stock ticker at a Fidelity Investments office in Boston, Massachusetts.

Brian Snyder | Reuters

Thanks to record-breaking markets and more retirement savings, there are a record number of 401(k) and IRA millionaires in the United States.

Fidelity has released its quarterly analysis of retirement trends, which has become increasingly relevant as baby boomers are now retiring in record numbers.

The study found 441,000 IRA or 401(k) accounts they manage had balances of $1 million or more, a new record. Fidelity is the largest 401(k) provider in the U.S.

Still, 401(k) and IRA millionaires are relatively rare: Fidelity manages 27.2 million 401(k) and IRA accounts, so only 1.6% of those accounts have $1 million or more in them.

As for the rest of us, there’s good news and bad news, particularly for those at or near retirement.

The good news:

  1. Average 401(k) and IRA balances have hit record levels. The average 401(k) balance rose to $112,300, a 7% increase from last quarter’s balance of $105,200. The average IRA balance was $115,400, also a new record.
  2. It’s not just because the markets are up — employees are saving more. One-third of plan participants increased the amount they were saving by an average of 3%.
  3. A record number of workplace plans (32%) offered a managed account, which provide workers with professional planning and support. That support is a big confidence booster for savers.
  4. Automatic enrollment is catching on — a record 35% of employers automatically enrolled new workers in their 401(k) plan. Studies have consistently shown that automatic enrollment has been a major factor in increasing savings. Too many people don’t act affirmatively to start saving–automatic enrollment does that for them.

The bad news

Drill down into the results, and the situation is particularly difficult for baby boomers, that huge group (those born between 1946 and 1964) who are now entering retirement age in record numbers.

Those boomers — they are now 56 to 73 years old — have an average balance of $210,400, but it’s well-known that small groups of super-savers — the 401(k) millionaires–drag the averages up.

The median — where half have more and half have less — is a far-more modest $69,900.

That leaves very little to drawn down on a yearly basis. Assuming a 5% yearly drawdown, that’s about $3,500 a year.

Of course, that is not the complete retirement picture. There is Social Security, and pensions. And some have more than one retirement account. For example, if someone takes a new job, but rolls their old 401(k) into an IRA, their new 401(k) would have an initial balance of $0, which would keep the median and average down.

Fidelity notes that those who have been in their 401(k)s longer have higher averages, which makes sense. Among individuals who have been in their 401(k) plan for 10 years straight, the average balance reached a record $328,200.

Still, even Fidelity admits more needs to be done. “Millions of people rely on a 401(k), 403(b) or IRA as primary vehicles for retirement savings, so the industry needs to continue to find ways to make these accounts more accessible, more efficient and easier to use,” Kevin Barry, president of Workplace Investing at Fidelity Investments, said in a statement.

The recently passed SECURE Act should help: It raising the minimum age for required minimum distributions, which allows older investors to keep more in their retirement plan for longer periods. It allows investors to contribute to traditional IRAs after turning 70.5 years of age, and makes it easier for administrators to offer annuities, which under some circumstances may be an attractive way to reduce risk.

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