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Photographer: David Paul Morris/Bloomberg
Savings & Retirement

American Workplace Retirement Savings Accounts Hit New Records

A third of people in 401(k) plans increased their contributions, and the booming stock market lifted balances.

It’s a good time to take a peek at your 401(k) balance.

Americans finished 2020 with the largest nest eggs on record, as the bull market and automatic annual contribution increases lifted the value of investments in accounts that help reduce taxes and encourage long-term savings, according to new figures from Fidelity Investments.

The average 401(k) balance rose 11% in the fourth quarter to $121,500, Fidelity said. The performance lagged major stock indices, but that is likely by design, since many 401(k) accounts aren’t fully invested in equities.

People saved an average of 9.1% of their salary, Fidelity said. Employer matches added another 4.4 percentage points on top. That’s within spitting distance of the 15% of one’s income that many financial planners recommend as a starting savings goal.

Jeanne Thompson, a senior vice president at Fidelity, said the latest figures are some of the best data she’s seen in her career.

A Decade of Growth

Women in the same plan for 10 years have seen their balance grow nearly 400% since 2010.

Source: Fidelity Investments; Data for 2010 is as of Q2

Underneath the numbers, however, is a tale of the haves and have-nots.

Data from the U.S. Census Bureau for 2017 found that while 79% of workers are employed by companies that have a 401(k) or similar kind of tax-deferred plan, only 32% of American workers were saving anything in those plans.

And while women’s average savings rates in 401(k)s, at 9%, drew closer to men’s 9.4% rate, men ended the year with an average balance of $144,500, compared with $97,800 for women.

Women who have had the same 401(k) plan for 10 years, meanwhile, saw average balances jump from $249,200 a year ago to $297,900 in the final quarter of 2020. Two-thirds of that growth came from stock market performance, and a third from contributions.

More highlights from Fidelity’s 401(k) analysis: 

  • For all of 2020, 33% of 401(k) plan participants raised their contribution level, 58% kept it the same and 9% lessened it. Many plans now automatically increase employee savings rates by 1% a year, up to a certain cap.
  • The average IRA balance rose to $128,100 in the fourth quarter, up 11% since the third quarter.
  • Gen Z retirement savers saw average 401(k) balances rise 13.3% in the fourth quarter, to $5,800. The number of IRAs among Gen Z investors almost tripled in 2020 to more than 114,000 accounts.
  • A total of 1.6 million people took CARES Act distributions from retirement savings accounts at Fidelity in 2020. Employees in the manufacturing sector made up about 25% of that number, followed by health care workers. The average withdrawal was $9,400, and the median was $2,500.