BOSTON--(Fidelity Investments® today unveiled an analysis1 of nearly one million investors using both a workplace savings plan and an Individual Retirement Account (IRA). The findings show a combined average balance of $225,600 as of Dec. 31, 2012, which is nearly three times higher than the average Fidelity 401(k) balance of $77,3002. The analysis is a leading indicator of Americans’ retirement readiness because it provides a more comprehensive look at two of the most popular retirement savings vehicles.)--
“It’s encouraging that more investors are recognizing the importance of starting to save earlier and taking a more comprehensive savings approach to help ensure that they can reach their goals and have more control of their personal economy.”
“While workplace retirement accounts are a great place to save for retirement, we know some will need additional savings to achieve their vision of retirement as they encounter all that life entails,” said James M. MacDonald, president, Workplace Investing, Fidelity Investments. “By maximizing the long-term, tax-advantaged growth potential of both workplace savings plans and IRAs, investors can create a personalized plan to help them achieve better outcomes in retirement.”
Reviewing the savings behaviors of investors during 2012, Fidelity examined the account balances and contributions of those using a workplace 401(k) or 403(b)3 and an IRA. The key findings include:
- Higher Account Balances: While the combined average balance for investors in their 20s was $30,200, the numbers steadily increase with age – up to $397,400 for those who are on the verge of or entering retirement (between the ages of 65 and 69)4.
- Improved Annual Contribution Rates: The average combined contribution for investors in their 20s was $6,000 and gradually increased with age. The average combined contribution for all investors in the population was $11,150.5
Contribution Levels Peak With Investors in Their 50s
This analysis also examined the savings rate of investors across multiple age ranges and found average combined contribution levels peaked annually at $13,100 for investors in their 50s. This can be attributed to higher income levels and the ability to make catch-up contributions beginning at age 50.
“With recent changes in tax law, investors of all ages are searching for tax diversified savings strategies for their retirement plan,” said Kathleen A. Murphy, president, Personal Investing, Fidelity Investments. “It’s encouraging that more investors are recognizing the importance of starting to save earlier and taking a more comprehensive savings approach to help ensure that they can reach their goals and have more control of their personal economy.”
For tax year 2013, the contribution limits for both 401(k)/403(b) plans and IRAs have increased $500 to $17,500 and $5,500, respectively. Additionally, for those investors 50 years or older, the contribution limit increases for both 401(k)/403(b) plans and IRAs to $23,000 and $6,500, respectively. This represents an opportunity for investors to save even more for retirement, but they must proactively take steps to ensure their total contributions for the year are increased to meet the new limits.
Fidelity Provides Critical Guidance to Help Americans Reach Their Goals
As Fidelity helps more people save for and transition into retirement than any other firm, it has deep insight into the types of guidance and strategies individual investors and workplace participants are seeking and utilizing. To address their needs, Fidelity offers planning tools such as Retirement Quick Check, which helps investors see how much they may be on track to have in retirement and what to do to help improve their future outcome, and Portfolio Review, which can suggest an investment mix to help investors better align their portfolio with their goals. In addition, Fidelity is currently rolling out Income Simulator, a new tool to help its workplace participants find a strategy to help meet their retirement income needs.
Infographic on Balances and Contribution Levels Available for Download
About Fidelity Investments
Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $4.0 trillion, including managed assets of $1.7 trillion, as of January 31, 2013. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.
Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.
Past performance is no guarantee of future results.
Guidance provided by Fidelity is educational in nature, is not individualized and is not intended to serve as the primary or sole basis for your investment or tax-planning decisions.
It is your responsibility to select and monitor your investments to make sure they continue to reflect your financial situation, risk tolerance, and time horizon. Most investment professionals suggest that you reexamine your investment strategy at least annually or when your situation changes. In addition, you may want to consult an investment adviser regarding your specific situation.
Retirement Quick Check and Portfolio Review are educational tools.
Fidelity Brokerage Services LLC, Member NYSE, SIPC
900 Salem Street, Smithfield, RI 02917
Fidelity Investments Institutional Services Company, Inc.
500 Salem Street, Smithfield, RI 02917
© 2013 FMR LLC. All rights reserved.
1 This analysis was based on the population of 999,000 individuals who had both IRA and 401(k) (or 403(b)) balances at Fidelity as of 12/31/2012. These individuals consist of those actively employed as well as those terminated from their 401(k)/403(b) plan sponsor. Only a subset of these individuals made contributions into their IRAs and/or 401(k)/403(b) plan in 2012. Excluded are individuals in Fidelity’s own employee plans, as well as those in the advisor-sold channel. Additionally, many workplace plan participants presumably have IRAs that are not serviced by Fidelity, and these balances are not reflected in this analysis.
2 The average 401(k) balance of $77,300 is as of 12/31/2012, and is based on approximately 20,500 corporate DC (i.e., excluding Tax Exempt) workplace plans and 12 million participants. The average overall 401(k) balance at the individual level as of 12/31/2012 for 401(k) and tax-exempt plans, but excluding advisor-sold plans, was $78,400.
3 This analysis includes Fidelity’s entire Tax Exempt offering, not just 403(b). This could include 403(b), governmental 457(b), 401(a), and other plan types.
4 The combined average balance peaked at $447,800 for investors between the ages of 70 and 75.
5 Average contribution amounts are based on total contribution dollars into IRAs and 401(k)s/403(b)s divided by number of unique individuals making any type of contribution (i.e., IRA only, 401(k)/ 403(b) only, or both IRA and 401(k)/403(b)). This excludes employer contributions.