Retirement accounts saw solid growth thanks to Wall Street gains

LOS ANGELES â€”  Strong growth for stocks on Wall Street this year has helped juice gains for savers with retirement accounts.

The average 401(k) plan balance stood at $127,100 at the end of the second quarter, an increase of 13% from the same period last year, according to data from Fidelity Investments drawn from 24 million accounts.

The average balance in the April-June quarter was up just 1% from the first three months of the year, when the average 401(k) balance jumped 16.4% from a year earlier.

“Retirement savers in the second quarter of 2024 benefited from the continued upswing of the previous quarter, when contribution levels and average account balances reached record highs,� said Sharon Brovelli, president of workplace investing at Fidelity Investments.

The median 401(k) plan balance was just $29,200 at the end of the second quarter, an increase of 17% from a year earlier. The median figure tends to skew lower than the average because of workers who recently enrolled in a 401(k) plan but haven’t had time to build up a balance.

About 35% of Americans reported having a 401(k) or similar retirement savings plan in 2020, according to the Census Bureau.

Individual retirement accounts, or IRAs, also rose. The average balance was $129,200 by the end of the second quarter, an increase of 1% from the first quarter and up 14% from the second quarter last year, Fidelity said.

The retirement savings plans’ gains came as the major stock indexes crushed multiple record highs amid a wave of enthusiasm over artificial intelligence developments that fueled demand for shares in major tech stocks, including chipmaker Nvidia, Meta Platforms, Microsoft and Amazon.

The benchmark Standard & Poor’s 500 index rallied to a roughly 15% gain through the first six months of the year. It has since added 2.4% and is up about 17% as of Wednesday.

The savings rate, or how much savers set aside from their pay combined with contributions from their employer, also helped push up 401(k) plan balances. The savings rate was 14.2%, Fidelity said. That’s down slightly from 14.1% in the first quarter, but higher than the 13.9% rate in the second quarter last year.

For many savers, their growing nest eggs are proving too tempting not to tap early. Some 18.3% of employees with a 401(k) plan had a loan outstanding on their retirement account balance in the second quarter, Fidelity said. That’s up from 17.2% in the same quarter last year.

Veiga writes for the Associated Press.