According to Fidelity, the average balance in a 401(k) has increased by 39% over the last decade.

Fidelity Investments’ latest analysis reveals that the second quarter of this year was favorable for those saving for retirement. Thanks to ongoing contributions from both employees and employers, as well as an improving market, average 401(k) balances increased across all age groups not only in the second quarter but also in comparison to the same period the previous year.

Here are some specific figures based on data from Fidelity, a prominent provider of workplace retirement plans with over 23 million 401(k) participants.

Overall, the average 401(k) balance reached $112,400, marking a 4% rise from the first quarter. This marks the third consecutive quarter of growth in average balances, which have increased by 39% over the past decade.

In analyzing savings growth over the last year, Fidelity discovered that the average 401(k) account for Baby Boomers saw a 6.3% increase. Given that many Boomers are on the brink of retirement, a significant number have been saving consistently since 2008, resulting in an average balance of $499,000. This figure significantly surpasses the second quarter average of $220,900 for this age group.

For younger workers, the past year brought double-digit percentage increases in their 401(k) balances: 14.5% for Gen Xers, totaling $153,300; 24.5% for Millennials, amounting to $48,300; and an impressive 66% increase for Gen Z workers, reaching $8,100.

Consistent savers across all generations enjoyed similar double-digit percentage growth over the past 5, 10, and 15 years, according to Fidelity.

The crucial factor in building a solid retirement fund lies in consistent saving, along with the level of contributions made to the account. In the second quarter, Fidelity’s findings showed that total contribution rates, encompassing both employee savings and employer matches, averaged 13.9% of gross income. While this aligns with recent quarters, it falls slightly below Fidelity’s recommended savings rate of 15%. Among generations, Boomers exhibited the highest average contribution rate at 16.6%.

Kevin Barry, President of Workplace Investing at Fidelity Investments, emphasized the importance of maintaining high contribution and savings rates in light of improving market conditions to enhance retirement readiness.

However, early withdrawals from retirement funds before reaching retirement age can hinder progress, as a reduced amount remains invested, leading to slower compounding. Additionally, such withdrawals are subject to taxation and may incur an early withdrawal penalty of 10% for those under 59-1/2.

Nevertheless, specific situations may warrant taking out a 401(k) loan with interest, providing a solution to immediate financial challenges that could otherwise have long-term negative impacts.

Fidelity’s data revealed a slight increase in the percentage of participants with outstanding 401(k) loans during the second quarter, rising to 17.1% from 16.6% in the first quarter. However, the latter figure represented an all-time low, significantly below the pre-pandemic level of outstanding loans, as noted by the company.

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