Fidelity Sees Record High 401(k) Contribution Levels

Record-high retirement saving contribution levels combined with favorable market conditions elevated average account balances to their highest since Q4 2021, according to Fidelity Investment’s first quarter 2024 participant analysis released Thursday.

“This quarter we saw contribution rates for both employers and employees reach record levels, which resulted in the total savings rate reaching a record high,” says Michael Shamrell, vice president of thought leadership for Fidelity’s Workplace Investing.

Total average 401(k) savings rates hit 14.2%, a record for Fidelity’s tracking, driven by employee (9.4%) and employer (4.8%) contributions along with auto escalation, according to the firm’s analysis of 23.9 million participants.

“Employers are continuing to increase their match amounts, both as a commitment to employee financial wellness and also as talent attraction and retention tool,” Shamrell says. “Interestingly, this quarter, almost 1 in 5 participants increased their savings rate, and of that group, almost two-thirds were due to auto-increase.”

When considering all savers in Fidelity IRAs, 401(k)s and 403(b)s, the firm saw the highest average balance since Q1 2021. The firm also broke out the increase in average account balances over a 10-year period, noting the strong growth for those invested for the long-term:

The recordkeeper and financial services provider also highlighted the success of savers working for small businesses in a nod to May being Small Business Month. Fidelity found that small business retirement savers now have higher account balances than traditional 401(k) holders.

The findings are positive for small businesses with plans, but access continues to be a strain for such employers, with federal and state policymakers pushing to solve that issue with a combination of incentives and mandates. Right now, only about 30% of small businesses provide a retirement savings benefit, according to Fidelity research.

“Small businesses are at the heart of American communities, and it is encouraging to see that when small business employees are given the opportunity to save, they run with it,” says Roger Stiles, president of Fidelity Wealth. “Offering small businesses a variety of options to help meet their retirement needs is an important way to close any existing retirement coverage gaps and get more Americans saving for retirement.”

Fidelity’s data revealing that average account balances for SEP IRAs, SIMPLE IRAs, and self-employed 401(k)s are exceeding those of traditional 401(k) accounts. Small business retirement accounts have an average balance of $152,000 and an average contribution rate of 8%, compared to a 9.3% deferral rate for traditional 401(k) accounts. Additionally, the average tenure for small business retirement savers is 9.9 years, whereas for traditional 401(k) holders, it is 8.6 years.

The firm noted that the Fidelity Advantage 401(k), aimed at employers introducing a 401(k) for the first time, has experienced significant growth since its 2021 launch. From 2022 to 2023, total assets grew by 417.5%. Since 2021, 761 small businesses have enrolled, covering 17,000 eligible employees.

“We are thrilled to see small business owners and employees continue to grow their retirement savings to impressive levels,” says Roger Morrisette, Fidelity’s vice president of small business retirement products. “There are a range of small business retirement options for employers to choose from, many of which offer higher contribution limits than more traditional individual retirement account options, thereby allowing these individuals to save at a higher rate.”

Fidelity’s report drew on 15.3 million IRA accounts as of March 31, 2024 and 23.9 million participants in 25,800 corporate DC plans as of March 31, 2024. The data excludes non-qualified DC plans and Fidelity’s own employees.