A million dollars is often seen as the golden savings standard to ensure a comfortable retirement. According to a recent report by Bankrate, the millennial generation of working adults is still the most likely to say they need at least $1 million to retire comfortably, and the number of young retirement savers reaching this key savings threshold has seen a historic surge.
Fidelity Investments data prepared for CNBC shows that the number of millennials with seven-figure balances (born between the 1980s and the mid-1990s) has increased by 400% compared to a year ago.
As per Fidelity, as of September 30, the number of 401(k) accounts within this group with balances of $1 million or more has risen from around 2,000 in the third quarter of 2023 to approximately 10,000.
Typically, it takes decades of consistent contributions to reach the status of a 401(k) millionaire, making this milestone even more challenging for young working adults.
Reportedly, the favorable market conditions this year have helped these accounts reach new balance highs. As of December 19, the Nasdaq index has risen by 29% this year, the S&P 500 index has increased by 23%, and the Dow Jones Industrial Average has climbed over 12%.
In addition to the market environment, the significant increase in the number of millionaires can also be attributed to individuals’ long-term commitment to saving.
Chelsea Ransom-Cooper, a financial planner and certified financial planner at Zenith Wealth Partners in New Jersey, often encourages her millennial clients to contribute more than the amount required for employer matching, and even reach the maximum annual contribution limits for their 401(k) or IRA accounts.
By 2025, employees can defer $23,500 into their 401(k) retirement plans, up from $23,000 in 2024. Meanwhile, employer contributions continue to rise.
The Plan Sponsor Council of America survey shows that the average savings rate for 401(k) plans (including both employee deferrals and company contributions) increased from 12.1% in 2023 to 12.7%.
Clearly, this will help boost the amounts in retirement savings accounts, helping individuals achieve their visions of a “comfortable retirement”.