Even with other ongoing financial struggles, retirement savers ended the year on a positive note with improved market conditions and consistent contributions helping boost average account balances to their highest level in nearly two years.
Indeed, according to the latest data from Fidelity Investments’ Q4 2023 retirement analysis, the fourth quarter saw a 20% increase in 401(k) millionaires following the third quarter, when the number of millionaires dropped as a result of market conditions. The number of millionaires in Q4 is also 11.5% higher than Q2 2023.
Savings Rates and Balances
Meanwhile, total 401(k) savings rates—which include contributions from employees and their employers—remained steady at 13.9%, consistent with Q2 and Q3 2023, and up slightly from a year ago (13.7%).
More than a third (37%) of workers increased their retirement savings contribution rate in 2023. Drilling down further, 48% of individuals proactively increased their contribution rate in Q4, rather than relying on auto increases. For the full year 2023, of the people who increased their contribution, 27% proactively increased their contribution rate.
The average 401(k) balance increased 14.1% in 2023, while the average 403(b) balance increased 14.5% over the past year. In fact, the average balance for Gen X workers in their 401(k) plan for 15 years straight topped half a million dollars ($501,000) at year end 2023, illustrating the benefits of consistent savings, contributing enough to receive the employer match and taking a long-term approach to retirement.
| Average Retirement Account Balances | |||||
|---|---|---|---|---|---|
| Q4 2023 | Q3 2023 | Q4 2022 | Q4 2018 | Q4 2013 | |
| 401(k) | $118,600 | +10% | +14% | +24% | +32% |
| 403(b) | $106,100 | +9% | +14% | +35% | +50% |
| IRA | $116,600 | +6% | +12% | +18% | +31% |
Source: Fidelity
In addition to fluctuating economic conditions, positive savings behaviors also played a key role in helping workers reach their retirement goals. At the end of 2023, 78% of 401(k) savers were contributing at a rate high enough to secure the full matching contribution offered by their employer, Fidelity notes.
Employers on Fidelity’s platform contributed an average of $4,600 to workers’ retirement accounts in 2023, and 81% of workers received some type of employer contribution last year.
Overall, nearly three out of four (73%) eligible employees participated in their employer’s workplace savings plan in 2023.
Most pre-retirees and retirees under the age of 70 maintain a saver’s mindset and do not withdraw from their 401(k) plans, the report further observes. In this case, the report shows that 94% of retirees aged 73+ made 401(k) withdrawals in 2023, while only 20% of retirees aged 70-72 made 401(k) withdrawals in 2023.
Required minimum distributions (RMDs) likely accounted for the large percentage of those age 70+ who took withdrawals, according to the report. In addition, regulatory shifts, like the SECURE 2.0’s increase of the RMD age to 73 in 2023 and the CARES Act’s 2020 RMD waiver, may have influenced these rates, possibly leading to fewer withdrawals by those over 70 in those years, Fidelity noted.
Plan Design Trends
Employers, meanwhile, continue to explore plan design features that can help improve savings efforts among their workforce, according to Fidelity.
For example, the percentage of plans that offer a Roth option has increased significantly over the last five years. In addition, more than a third of 401(k) plans default auto-enrolled employees at a 5% contribution rate or higher.
| 401(k) Plan Design Trends | Q4 2023 | Q4 2018 |
|---|---|---|
| Use of auto enrollment (AE) | 38.8% | 33% |
| Average AE default contribution rate | 4.1% | 3.9% |
| AE plans that default 5% or higher contribution rate | 38.5% | 32.5% |
| Default to Target Date Funds | 94.3% | 89.9% |
| Percentage of plans that offer most popular 401(k) match formula | 44.9% | 40.6% |
| Percentage of plans that offer a workplace managed account | 42.1% | 27.9% |
| Percentage of plans that offer a Roth option | 90.4% | 67.2% |
Source: Fidelity
“This past year ended on a high note for retirement savers,” stated Sharon Brovelli, president of Workplace Investing at Fidelity Investments. “When it comes to matters like market stability and economic events, 2023 gave us the highs of the highs, and the lows of the lows, but encouragingly, many retirement savers took the long view and stayed the course through it all, which is the type of commitment that can lead to a secure financial future.”
Fidelity’s Q4 2023 analysis is based on the savings behaviors and account balances for more than 45 million IRA, 401(k) and 403(b) retirement accounts on the firm’s platform.
