In a year marked by resilient economic growth and a notable uptick in consumer confidence, the U.S. saw substantial positive shifts in retirement savings plans. That’s according to the latest retirement data from Fidelity, which showed more than a third (37 percent) of American workers took proactive steps towards their financial future by increasing their retirement savings contribution rates in 2023.
That surge in savings activity occurred as US payrolls rose by 2.7 million and consumer confidence rebounded. At the same time, employers kicked in an average of $4,600 to their workers' retirement accounts, helping lay a strong foundation for their future financial well-being.
The participation rate in employer-sponsored retirement plans remained high, according to Fidelity’s retirement report, with 73 percent of eligible employees contributing to their workplace savings plan in 2023.
Average 401(k) balances saw a significant rise of 14.1 percent over the year, reaching $118,600 in the fourth quarter. That was mirrored in the 403(b) space, where average balances climbed to $106,100 on the back of a 14.5 percent increase.
The data also showed increasing adoption of auto-enrollment policies among employers, with more than a third of 401(k) plans setting the initial contribution rate at 5% or higher. Building off that behavioral nudge, four-fifths of savers (78%) are now contributing at a rate sufficient to capture the full employer match, maximizing their savings potential.
The report highlighted a growing trend towards flexible retirement savings, with 94 percent of plans offering Roth options by Q4 2023, a significant increase over the past five years.
Among Gen X workers who have consistently contributed to their 401(k) plans for 15 years, the average balance surpassed the half-million mark to reach $501,000 at year-end 2023.
Fidelity also noted that the number of 401(k) millionaires jumped 20 percent during the fourth quarter, after taking a hit in the third quarter amid challenging market conditions. The millionaire count in the fourth quarter was 11.5 percent higher than in the second quarter of last year.
The number of 401(k) millionaires totaled 422,000 as of the fourth quarter.
Younger savers also appeared to lead the charge in adopting target-date funds. By the end of last year, Fidelity reported that 63.3 percent of workers were putting their retirement savings in those dynamic asset-allocation products, including 84.4 percent of Gen Z workers.
The popularity of individual retirement accounts is also continuing to rise, particularly among female Gen Z investors, who saw a 59 percent increase in account ownership from Q4 2022 to Q4 2023. During that time, the overall number of IRAs receiving contributions rose by 12 percent, with the average contribution amount hitting $4,200 in 2023.
The report is based on data from the 45 million of 401(k) and 403(b) accounts and IRAs that Fidelity administers.
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