With each passing day of stock market volatility, retirement savers have more to lose — a lot more, in fact.
The number of Fidelity 401(k) savings accounts with a balance of $1 million or more jumped to a record 150,000 in the fourth quarter, up from 93,000 a year earlier.
And for the first time, average retirement savings balances have hit six figures, according to the latest quarterly report by Fidelity Investments. The average 401(k) balance reached $104,300, while the average IRA balance was as high as $106,000 in the fourth quarter of 2017, Fidelity found.
Number of 401(k) millionaires
| Account Type | Q4 2017 | Q4 2016 | Q4 2012 |
|---|---|---|---|
| 401(k) | 150,000 | 93,000 | 35,000 |
Source: Source: Fidelity Investments
Women, in particular, are making significant strides when it comes to savings. The percentage of female 401(k) millionaires doubled in the past dozen years, Fidelity found, climbing to 20 percent in 2017 from 10 percent in 2005.
Nearly 3 in 10 savers increased their contribution rate over the last year, Fidelity said. The average 401(k) contribution rate is now 8.6 percent as of the fourth quarter, the highest percentage in almost 10 years.
While the increase is due, in part, to the market run-up, recent market swings should not deter savers, said Jeanne Thompson, a senior vice president of Fidelity Investments.
"The first piece of advice, especially for retirement savers, is not to have a knee-jerk reaction," she said. "Saving for retirement is a marathon, not a sprint, and you want to ride the highs and lows."
Three tips to grow your 401(k)
1. Start saving as early as possible. "The story of the 401(k) millionaire highlights the beauty of compounding," Thompson said. "To save a million within a 401(k), it does take the better part of a career."
2. Take full advantage of a company match, when available. Roughly 1 in 5 workers still isn't contributing enough to get a full employer match, according to Fidelity. That's partly because many companies auto-enroll at a level that is lower than the match ceiling. To work your way up, Thompson suggests incremental changes. "Increase your savings 1 percent every year to a target of 15 percent."
3. Don't invest too conservatively for your age. For young investors, shying away from stocks in favor of bonds could short-change your long-term grown potential (less risk means less return), Thompson said.
Continue to contribute, Thompson advised, but if you're no longer comfortable managing the 401(k) yourself, "consider opting in to a target date fund or managed account," she said. "That can help determine the right amount of equities, bonds and cash."
As a rule of thumb, Thompson recommends saving 10 times your income by retirement age, in which case, "a million is a good savings target for someone earning $100,000," she said.