Why the Number of 401(k) Millionaires Just Hit a Record High — Again

With the stock market's gains propelling retirement account balances to new highs, a record number of savers can now call themselves 401(k) millionaires.

A record 544,000 401(k) accounts had balances of $1 million or more as of the end of the third quarter (July through September), according to new data from Fidelity. That's a jump of 9.5% from the previous quarter (April through June).

"We are continuing to observe a dedication to saving for retirement, with contributions to these vehicles holding steady,” Sharon Brovelli, Fidelity's president of workplace investing, said in a news release.

The average 401(k) account balance in Fidelity's dataset of 24 million retirement savers was $132,300 in the third quarter, up 23% from a year earlier.

Older workers typically save at the highest rates, but starting to save for retirement at a young age is important. Young workers benefit from a long time horizon that allows their contributions to increase in value.

Here are the average 401(k) balances by generation, according to Fidelity:

• Boomers: $250,900
• Gen X: $191,900
• Gen Y: $66,500
• Gen Z: $13,000

Fidelity says account balances have been buoyed by market gains this year. Since the end of the third quarter, the stock market has risen further, suggesting that savers' 401(k) balances — and the number of millionaires — continues to climb.

Becoming a 401(k) millionaire is doable but takes dedication

Accumulating a balance of $1 million is a major accomplishment in retirement planning. It typically takes consistent saving — and a long time horizon — to achieve the milestone.

The annual maximum 401(k) contribution for 2024 is $23,000, or $30,500 if you're above the age of 50. In 2025, the contribution limit will go up $500 for most savers, although a new rule allowing "super" contributions will allow some older workers to stash away nearly $35,000.

Contributing pre-tax dollars to a 401(k) account has multiple benefits. Since 401(k) contributions are tax-deferred, you reduce your taxable income every year you contribute. This lowers the amount you pay in taxes and can potentially drop you into a lower tax bracket, to boot. You typically don't pay any taxes until you withdraw funds in retirement. Since most people's incomes drop after they retire, this means that you'll probably be in a lower tax bracket by the time you tap your 401(k).

As the year nears its end, it's a good time to review your 401(k) savings and think about your savings goals. If you haven't hit your annual limit and want to make additional contributions, you should contact your company's payroll department now.

While you don't need to max out your contributions to become a 401(k) millionaire, saving a good portion of your earnings on a regular basis and taking advantage of available employer matches are among the keys to success.

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