401(k) Millionaires

What does this mean for your overall retirement strategy?

Your workplace retirement account can play a critical role in your overall retirement strategy. However, some have gone further with the accounts than others, especially recently. 

CNBC reported on findings that place 401(k) accounts at all-time highs, with some even joining the much-desired “two comma club” of 401(k) millionaires. Average 401(k) balances jumped 24% from the previous year to $129,300. Also on the rise were overall contributions, with 12% increasing their contributions since last year and 37% of employers placing new employees into workplace plans. The study discovered a record 412,000 401(k) plans with million-dollar balances; overall Individual Retirement Account (IRA) millionaires reached 342,000, another record.¹

Some of this represents a correction from 2020 as well as the economic uncertainty faced during the early days of the global pandemic. People are rethinking their retirement needs and taking advantage of employer matches, if available. It also reflects businesses working to entice employees; even some restaurants are offering 401(k) plans to their workers these days, in a bid to maintain staffing levels year-round.¹

401(k) retirement plans offer benefits like providing multiple options for tax benefits, including the choice to pay taxes on retirement funds now or later. Contributions of up to $19,500 to traditional 401(k) accounts are tax-deductible in 2021. There are financial safeguards protecting your 401(k) plan. Plan administrators can’t push investments that maximize profits, but instead need to ensure workers have access to stable funds with reasonable fees under the Employee Retirement Income Security Act, ERISA. They also must disclose information such as administrative expenses and historical fund performance to help employees make informed investment decisions. After age 72, you can still contribute to your 401(k) plan if you are still working, unlike other retirement accounts.

It’s little wonder that the 401(k) is a highly popular employer-sponsored retirement plan in the nation. What does this mean for your overall retirement strategy?