Wall Street rally helped boost gains for 401(k) plan savers in the first half of 2024
Strong growth for stocks on Wall Street this year have helped juice gains for savers with retirement accounts
LOS ANGELES -- Strong growth for stocks on Wall Street this year have helped juice gains for savers with retirement accounts.
The average 401(k) plan balance stood at $127,100 at the end of the second quarter, an increase of 13% from the same period last year, according to data from Fidelity Investments drawn from 24 million accounts.
The average balance in the April-June quarter was up just 1% from the first three months of the year, when the average 401(k) balance jumped 16.4% from a year earlier.
“Retirement savers in the second quarter of 2024 benefited from the continued upswing of the previous quarter, when contribution levels and average account balances reached record highs,” said Sharon Brovelli, president of workplace investing at Fidelity Investments.
The median 401(k) plan balance was just $29,200 at the end of the second quarter, an increase of 17% from a year earlier. The median figure tends to skew lower than the average because workers who recently enrolled into a 401(k) plan but haven't had time to build up a balance.
About 35% of Americans reported having a 401(k) or similar retirement savings plan in 2020, according to the Census Bureau.
Individual retirement accounts, or IRAs, also rose. The average balance was $129,200 by the end of the second quarter, an increase of 1% from the first quarter and up 14% from the second quarter last year, Fidelity said.
The retirement savings plans' gains came as the major stock indexes crushed multiple record highs amid a wave of enthusiasm over artificial intelligence developments that fueled demand for shares in Big Tech stocks, including chipmaker Nvidia, Meta Platforms, Microsoft and Amazon.
The benchmark S&P 500 index rallied to a roughly 15% gain through the first six months of the year. It has since added another 2.4% and is up about 17% as of Wednesday.
The savings rate, or how much savers set aside from their pay combined with contributions from their employer, also helped push up 401(k) plan balances. The savings rate was 14.2%, Fidelity said. That’s down slightly from 14.1% in the first quarter, but higher than the 13.9% rate in the second quarter last year.
For many savers, their growing nest eggs are proving too tempting not to tap early. Some 18.3% of employees with a 401(k) plan had a loan outstanding on their retirement account balance in the second quarter, Fidelity said. That's up from 17.2% in the same quarter last year.