America’s retirement millionaires: Number of 401(K) savers with seven figure balances has shot up by 25% this year thanks to stock market rally – with more than 700,000 retirement accounts holding $1 million and more

A stock market rally has boosted the number of 401(K) savers with $1 million in their accounts this year by 25 percent, new figures show.

Research from investment firm Fidelity found that 378,000 of plan participants had 401(K) balances worth $1 million and more — up from 299,000 by the end of 2022.

Likewise, the number of IRA savers with seven-figure balances reached 350,000 as of June 30, according to Fidelity figures seen by the Wall Street Journal.

The rise was attributed to a stock market boom, which has seen the S&P 5000 rise 16.71 percent since January this year. Bonds also rose 0.31 percent, according to the Bloomberg US Aggregate Bond Index.

However, the numbers point to a recovery rather than an explosion, as the number of 401(K) millionaires is still below the level of two years ago.

By 2021, some 442,000 of Fidelity’s 401(K) accounts and 376,000 IRAs had more than $1 million in them. This number dropped 32 percent in 2022 as stock market turbulence plagued workers’ savings.

A balance of more than $1 million puts a Fidelity customer in the top 1.64 percent of accounts. For IRA owners — who tend to be wealthier — a seven-figure balance puts them in the wealthiest 2.5 percent.

Still, experts warn that the figure isn’t necessarily a strong measure of a comfortable retirement.

Fidelity Vice President Mike Shamrell told the WSJ: “We’re not saying $1 million is the perfect target,” adding that rising living costs meant savers would likely need more.

According to the study, the average age of a saver with a seven-figure retirement plan is 59 years old. They typically put $18.2 percent of their salary into their retirement savings, with their employer contributing another 9.3 percent.

Shamrell explained that these savers “are not people who found some hot stocks and added them to their 401(K) and suddenly the balance hit $1 million.”

The numbers come amid concerns that America is facing a retirement crisis, with workers saving too little for their twilight years.

According to Fidelity’s data, the average 401(K) account has only $112,400 as of June 30 of this year. It marked an 8.1 percent increase from $103.9000 at the end of December.

America is facing a retirement crisis as workers save too little for their twilight years, experts warn

This week, a report from Bank of America (BofA) sounded the alarm about a rise in employees taking “hardships” from their 401(K)s

But this figure would fall far short of covering a comfortable retirement, as analysis of figures from the Bureau of Labor Statistics show that the average 65-year-old spends $52,141 a year — or $4,345 a month.

A $112,400 pot would therefore only cover a retiree’s lifestyle for two years. A $1 million fund would cover them for 19 years – although this does not take into account the rise in inflation by the time they retire.

A 401(K) is a private pension to which both an individual and their employer contribute. This usually accounts for the bulk of a retiree’s income.

In addition, they can claim social security anywhere between the ages of 62 and 70.

But rampant inflation and rising interest rates are making it more difficult for workers to maintain their pension contributions.

Recent figures from the Bank of America show that more and more employees are taking “hardship” from their 401(K)s amid rampant inflation and rising interest rates.

About 15,950 of the company’s plan participants withdrew money from their accounts in the second quarter of the year. It represented a 36 percent increase over the same period in 2022.

And another 75,000 earners took out a loan from their plan — meaning they’ll pay back the amount in five years.