Record High of 401(k) Millionaires at Fidelity, Led by Generation X

It's only a matter of time before everyone becomes a millionaire, at least in one way or another. For the time being, the number of nominal millionaires at Fidelity has reached an all-time high, as reported by Bloomberg.

Increased IRA Contributions by Gen X

During the second quarter, Americans aged between 44 and 59 raised their Individual Retirement Account (IRA) contributions to the highest level in five years. The total contributions saw a 30% increase from the previous year, as per a report by Fidelity Investments.

Roger Stiles, the President of Fidelity Wealth, pointed out that despite financial burdens such as college expenses, elderly parents, and healthcare costs, Generation X savers are prioritizing retirement.

Key Findings from the Bloomberg Report

According to a survey by Charles Schwab, Generation X believes that an average net worth of $873,000 is required for financial comfort. The average 401(k) balance for Generation X at Fidelity was $182,100 in the second quarter, while the average IRA balance was $97,215.

The number of 401(k) millionaires at Fidelity reached a record-breaking 497,000, marking a 2.5% increase from the first quarter. The combination of contributions and market gains resulted in a third consecutive quarter of growth in retirement accounts. The average 401(k) balance rose to $127,100, and the average IRA balance increased to $129,200, marking a 1% increase since March 31.

The analysis by Fidelity and Bloomberg was based on "more than 48 million IRA, 401(k), and 403(b) retirement accounts as of June 30".

Changes in Retirement Account Rules

It was recently reported that the IRS is making it easier for Americans to access their retirement accounts. The new regulations are part of the SECURE Act 2.0, a law passed at the end of 2022 that introduced several changes to retirement plans. Under the new rule, retirement account owners can withdraw up to $1,000 for "emergencies," with the IRS providing a broad definition of the term.

Whether it's due to a car accident or excessive spending on food delivery services like GrubHub, the provision allows you to withdraw money from your account without the usual 10% penalty for withdrawals before the age of 59 1/2. However, you will still be liable for ordinary income tax and potentially miss out on future gains by cashing out early.

Bottom Line

The rise in 401(k) millionaires at Fidelity, led by Generation X, is a testament to the importance of retirement savings. Despite financial pressures, these individuals are prioritizing their future financial security. However, the recent changes in retirement account rules could potentially impact these savings. What are your thoughts on this trend and the new rules? Share this article with your friends and let us know your thoughts. Don't forget to sign up for the Daily Briefing, available every day at 6pm.