Following is the Q1 2015 retirement savings analysis from Fidelity Investments. The analysis includes highlights of 401(k) plans, Individual Retirement Accounts (IRAs) and small business retirement plans (bolded statements are my emphasis):
- The average 401(k) balance1 at the end of Q1 was $91,800. The average balance is up 0.5 percent from last quarter and up 3.6 percent from one year ago.
- More than a million workers increased their contribution rate in Q1 2015, and a record 23 percent of employees have increased their contribution rates since Q1 2014.
- The average overall savings rate, which includes both employee and employer contributions, increased to 12.5 percent. The employee contribution rate remained constant at 8.1 percent while the employer contribution rate climbed to 4.4 percent.
- Almost a third (27.9 percent) of all 401(k) plans automatically enroll new workers as of Q1 2015, up 2 percent points from one year ago, while 13 percent of employers will automatically increase employees' contribution rate each year.
- For employees in a 401(k) plan for 10 years or more2, the average balance was $251,600, up 12 percent year-over-year.
- The percentage of employees with an outstanding 401(k) loan dropped to 21.8 percent, the lowest level in five years.
- The average IRA balance at the end of Q1 was $94,100, a record high and up 5 percent over last quarter.
- While the average IRA contribution in Q1 was $3,150, a slight drop from the Q1 2014 average contribution of $3,270, the overall percentage of investors making a contribution to their IRA in Q1 2015 was 7% higher than in Q1 2014, and among investors under age 35 the increase was 26% year-over-year.
Combined IRA + 401(k) highlights
Following are highlights for investors that contribute to both an IRA and a 401(k) at Fidelity, through the end of 2014.
- The average combined IRA + 401(k) balance increased 2.2 percent year-over-year from $261,400 to $267,200.
- The average combined contribution increased 1 percent from $11,200 to $11,300.
Small business retirement plan highlights:
To provide insight on retirement savings trends among the country’s small business retirement3 plans, following are highlights for self-employed 401(k) accounts, self-employed (SEP) IRAs, and Savings Incentive Match Plan for Employees (SIMPLE) IRAs from 2007 through the end of 2014.
- For self-employed 401(k) accounts, the average balance at the end of 2014 was $144,100, a 39 percent increase since 2007. The average contribution was $22,400 at the end of 2014, a 29 percent increase since 2007.
- For SEP IRAs, the average balance at the end of 2014 was $89,800, a 48 percent increase since 2007. The average contribution for 2014 was $14,000, a 20 percent increase since 2007.
- For SIMPLE IRAs, the average balance at the end of 2014 was $37,700, a 54 percent increase since 2007. The average contribution for 2014 was $6,260, an 8 percent increase since 2007.
Contributions to retirement savings accounts have increased across the board, including IRAs, small business plans and traditional 401(k) accounts. While the increase in savings is encouraging, the still relatively low overall retirement account balances continues to be a concern. My hope is to see that the growth trend in contributions continues, as even an increase by one percent a year can have a great positive impact on long-term growth of employees’ retirement account balances.
- All 401(k) data as of March 31, 2015 unless otherwise stated, and is based on Fidelity’s record-kept corporate defined contribution plan base of 21,100 plans, including advisor plans but excluding tax-exempt plans, and 13.5 million participants (who are actively employed employees or retired or terminated employees who still carry a balance).
- Employees with a 401(k) balance and actively employed by their plan sponsor throughout the past 10 years.
- Fidelity generally defines a “small business” as a plan with less than 100 employees.