In a historic development for retirement savings, research by Capitalize reveals that for the first time, nearly three-fifths of American workers now have access to 401(k) retirement plans.
According to the company's newly unveiled 401(k) Statistics Tracker, access to 401(k) retirement plans has broadened to include more than 71.5 million private-sector employees in the US in 2023, marking a 6.35% increase from the previous year. This expansion means that an additional 4.3 million workers have been brought into the 401(k) system.
The research also highlighted a continued rise in 401(k) contributions, with the average amount that workers put into their accounts surpassing $5,000 for the second year in a row.
In 2023, American workers added an average of $5,191 to their retirement accounts – equal to 7.1 percent of the average worker's pretax income, or roughly $1 for every $14 earned. That's up slightly from the average contribution in 2022 and significantly higher than the 6.7% contribution rate in 2019.
In terms of savings accumulation, the average balance in 401(k) accounts grew by nearly 8 percent last year, to $90,101, up from $83,445 at year-end 2022. The median account balance also saw an uptick to reach $18,273, underscoring the disparity between long-term savers and the broader participant base.
The research also looked at the beneficial impact of employer contributions. Counting that, the average total annual contribution to 401(k)s jumped to $7,575, given an average employer match of $2,384 on top of employees’ retirement savings efforts.
A closer look at demographic trends uncovered stark differences in savings based on the tenure and age of account holders. Workers in their 50s with more than 30 years of saving showed average balances of $373,789, compared to $5,863 for those in their 20s with up to two years of tenure.
"Savers in their twenties tend to move jobs more frequently, have shorter-tenured accounts, and save differently from individuals in their fifties," Gaurav Sharma, co-founder and CEO of Capitalize, said in a statement.
The report also sheds light on the issue of orphaned 401(k) accounts, with the number of accounts that have been forgotten or left behind surging by more than 20 percent since May 2021 to reach 29.2 million.
“The majority of these forgotten accounts belong to younger workers, impacting their ability to save for retirement,” Sharma said.
Capitalize is a fintech platform that helps individuals locate their old 401(k)s and roll them over into individual retirement accounts.
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