The rising stock market in the second quarter helped propel Americans’ retirement savings to new heights and convinced investors to contribute more than ever to their next eggs.
The average retirement balances of over 30 million IRAs, 401(k)s and 403(b)s at Fidelity Investments rose to record levels in the second quarter for the third consecutive quarter.
For IRA accounts, the average balance was $134,900, a 4% gain from the last quarter; 401(k) balances grew 4% to $129,300, and the average 403(b) balance rose to a record $113,300, up 6% from the previous quarter.
“Amid a new wave of uncertainty, it’s really encouraging to see how well Americans are saving for the long term,” Jessica Macdonald, vice president of thought leadership at Fidelity, told Yahoo Money. “They are [also] increasing their savings rate on their retirement accounts and we see a downward trend in outstanding loans from those accounts.”
Overall, the average savings rate of 401(k) employees hit a record 9.3% in the quarter. In the past year, more than one in three of 401(k) savers have increased their savings rate, while only 7% of employees have reduced their 401(k) contribution since a year ago.
The enthusiasm to save spanned generations in the second quarter, when the Standard & Poor’s 500 index returned 8.2%.
For example, Gen Zers has 795,000 accounts on the Fidelity platform, which is a 10% jump from the start of this year. Millennials have increased their savings rate by 43% in the past year.
“It’s great that so many young people can take advantage of market performance simply by taking advantage of an advantage their employer offers,” she said. “It’s not just cryptos or single stocks.”
With most of their professional years ahead of them, Macdonald pointed out that younger generations are “seeing the benefits of stepping in now” and “letting the money work for them over the years.”
Baby boomers are using their remaining earning years to increase their retirement contributions, the data shows. A record 18.2% caught up last quarter, with nearly 3 in 5 of those making the maximum catching up contribution of 401(k) of $6,500 at the end of last year. The average 403(b) contribution rate for baby boomers also rose to 10.9% in the second quarter.
The average IRA contribution amount for baby boomers increased 17% to $3,570 last quarter, and the total number of IRA contributions among boomers increased 57% compared to the same quarter last year.
Macdonald attributes the tidal wave of additional savers in part to the automatic enrollment of retirement savings offered by employers.
“[Employers] automatically enroll employees,” she said, adding that some offer automatic raises to willing employees to contribute larger percentages annually as their pay rises home.
“There’s a lot of benefit to that of the employees who are automatically enrolled,” adding that only 91% of participants opt out. “Sometimes it’s just a matter of getting over that bump and signing up, which is the most important thing.”