Record High Retirement Savings
Fidelity Investments recently reported record-high contribution levels in 401(k) savings, according to its first-quarter 2024 participant analysis. Average 401(k) savings rates reached 14.2%, driven by favorable market conditions, increased employer contributions, and automatic escalation features.
Key Drivers of Growth
Employee contributions averaged 9.4%, while employers contributed 4.8%, the highest levels recorded by Fidelity. Employers are increasing their matching contributions to support employee financial wellness and as a tool to attract and retain talent. Automatic escalation, where contributions rise over time, has also played a major role in driving savings growth. Nearly 1 in 5 participants increased their savings this quarter, with two-thirds of these increases occurring automatically.
Small Business Retirement Savers Leading the Way
An interesting finding from the report is that employees at small businesses with access to retirement plans are outperforming traditional 401(k) participants in terms of savings. Small business retirement accounts, including SEP IRAs, SIMPLE IRAs, and self-employed 401(k)s, now average $152,000—surpassing traditional 401(k) balances. Small business savers also tend to stick with their plans longer, with an average tenure of 9.9 years compared to 8.6 years for traditional 401(k) savers.
However, only about 30% of small businesses offer retirement benefits. Federal and state policymakers are working to improve this through incentives and mandates to increase retirement plan access.
Looking Ahead
Fidelity’s report also highlights the long-term growth in retirement accounts, with balances in IRAs, 401(k)s, and 403(b)s growing by as much as 60% over the past decade. Products like Fidelity’s Advantage 401(k) have contributed to this growth, with over 400% asset growth since its 2021 launch.
As contributions continue to climb, the message is clear: employer support, automatic features, and accessible retirement plans are crucial for driving savings and securing long-term financial wellness.
