Record number of workers becoming 401(k) and IRA millionaires
WASHINGTON » Meet the newly minted millionaires next door.
They didn’t put all their money into a Microsoft-type stock that made them rich. They didn’t take a chance on speculating in cryptocurrency with its crazy volatility or start a business that they then sold to some billionaire.
No, many current millionaires are government workers, civil servants, educators, military service members (or retired military), managers or co-workers clocking in just like you, leaving at the end of a shift to run and pick up their kids from school. Many never earned six-figure salaries.
They’ve been investing for nearly three decades, taking every dollar offered by their employers in matching retirement contributions. They also don’t cash out their retirement savings when they change jobs.
And, most importantly, they didn’t let a pandemic or the related economic problems, or skittish investors, scare them away from the stock market.
In its quarterly retirement analysis, Fidelity Investments reported that its number of IRA (individual retirement account) and 401(k) millionaires hit an alltime high. Likewise, the number of millionaires investing in the Thrift Savings Plan (TSP), the federal government’s version of a 401(k), also spiked significantly.
What it tells us is that even amid economic uncertainty, people are still focused on their retirement savings goals, said Jason Jagatic, head of workplace thought leadership for Fidelity.
Fidelity, one of the largest managers of workplace plans, reported that its number of 401(k) millionaires in the fourth quarter of 2021 jumped 32% to 442,000, up from 334,000 a year earlier. The number of IRA millionaires increased 30%, from 288,300 to 376,100, for the same time period.
The number of millionaires investing in the Thrift Savings Plan also saw surged, by nearly 50%. As of Dec. 31, there were 112,880 TSP millionaires, up from 75,420 a year ago, according to the Federal Retirement Thrift Investment Board.
For the fourth quarter, account balances also ballooned, Fidelity said.
Its average 401(k) balance increased to a record $130,700 in the fourth quarter, up 4% from the previous quarter and 8% from a year ago. The average IRA balance was down slightly to $135,600 for the fourth quarter compared with the third quarter. But IRA balances were up 6% from the 2020 fourth quarter.
A record 38% of individuals increased their 401(k) contributions in 2021, with an average increase of more than 3%, Fidelity said.
It was wonderful to see younger Gen Z workers (individuals born between 1997 and 2012) increasing their retirement