More 401(k) millionaires than ever
After market rally, are you one of them?
The number of 401(k) millionaires hit a record in the third quarter as investors who own stocks in retirement accounts got a boost from the U.S. equity market touching a fresh high.
The tally of people with 401(k) accounts at Fidelity Investments with balances over $1 million climbed to 187,400 at the end of the September quarter, up
41 percent from the third quarter of 2017 and topping the previous record of
168,000 401(k) millionaires in this year’s second quarter. Fidelity, one of the nation’s largest administrators of workplace retirement plans, says it has 15 million 401(k) accounts.
In the same quarter 10 years ago during the 2008 financial crisis, there were only 19,300 retirement savers with
401(k) account balances topping $1 million, the mutual fund company said.
Wall St. rally drives rise
The sharp rise in 401(k) account balances in the July-through-September quarter was driven in large part by a big rally on Wall Street. The broad Standard & Poor’s 500 stock index jumped 7.2 percent and closed at a record of 2,930.75 on September 20.
The number of IRA millionaires at Fidelity also saw a sharp rise, jumping 25 percent from a year earlier to a record high of 170,400 at the end of this year’s third quarter.
Keys to success
Successful 401(k) savers tend to have high savings rates, take advantage of their employers’ matching contribution and invest a sizable percentage of their account in stocks.
At its peak in late September, the S&P 500 index of large-company U.S. stocks was up 333 percent since the bull market began on March 9, 2000.
The current bull market, now the longest in history, followed the worst market downturn since the Great Depression.
Bumpy October
Stocks, however, have turned volatile in the final quarter of 2018, with the S&P 500 in October briefly falling into correction territory, defined as a 10-percent drop from a prior high.
Heading into Monday’s trading session, the benchmark U.S. stock index was down 7.1 percent from its record.
“Most individuals will go through several periods of market volatility in their savings career,” Kevin Barry, president of workplace investing at Fidelity Investments, said in a statement. “So it’s important to stay the course, not react to short-term market events and continue to take a long-term approach.”