Americans grew their retirement savings over the past 12 months, boosting 401(k) contributions while also benefiting from stock market gains.
The typical 401(k) balance had increased 13% 12 months over 12 months as of the second quarter, which resulted in June, based on a latest report from investment management firm Fidelity.
It was the third consecutive quarter of growth, and it may be credited (mostly) to positive movement of stocks. The S&P 500, the index that tracks 500 of the biggest U.S. corporations, is up about 18% previously 12 months.
Fidelity’s evaluation brings welcome news, because the recent performance of retirement accounts represents a rebound after a downswing in 2022. That was the worst 12 months for 401(k) account performance for the reason that Great Recession because stocks and bonds each fell sharply.
It takes patience to attain your goals through a 401(k) — and there can definitely be ups and downs — nevertheless it’s a tried-and-true method to save lots of for retirement. Plans allow participants to make pre-tax contributions, receive employer matches and spend money on a diversified portfolio of assets.
Overall, the typical 401(k) balance as of June was $127,100. Here’s a breakdown of how much each generation had saved:
- Boomers (born between 1946 and 1964): $242,200
- Gen Xers (born between 1965 and 1980): $182,100
- Millennials (born between 1981 and 1996): $62,000
- Gen Zers (born between 1997 and 2012): $12,000
The typical 401(k) savings rate, including employer contributions, was 14.1% in second quarter, which is a record level and the closest ever to the 15% savings rate really helpful by Fidelity.
No matter age, Americans’ 401(k)s are mainly invested in stocks and bonds, often through mutual funds or target-date funds. These plans allow employees to schedule regular contributions, which are usually not taxed until you’re taking withdrawals after age 59 1/2. The suggested strategy is mostly to withdraw the funds once you have retired and are in a lower income tax bracket.
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