Americans’ 401(k) and IRA balances have reached all-time highs for the third consecutive quarter, according to Fidelity Investments. The average 401(k) balance was $97,700 as opposed to $73,300 five years ago. The average IRA balance hit $100,200, five years ago it was $73,100. Fidelity says the growth is due to 53 percent market action and 47 percent employee contributions. But, one in five workers aren’t taking advantage of their (401)k company match, potentially missing out on thousands of dollars….(read more)

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Americans’ 401(k) and IRA Accounts Reach All-Time Highs

In a notable financial achievement, Americans’ 401(k) and Individual retirement account (IRA) accounts have reached all-time highs. These retirement investment vehicles have witnessed significant growth in recent years, reflecting the increasing confidence of Americans in planning for their future financial security.

According to recent reports, the average 401(k) balance reached an impressive $106,478 in the first quarter of 2021, marking a remarkable 70% increase since the previous year. Additionally, the average IRA balance surged to $124,911 during the same period, a noteworthy 48% growth year-over-year. These figures clearly demonstrate the remarkable progress Americans are making in saving for their post-employment lives.

Several factors can be attributed to this surge in retirement savings. Firstly, an overall rise in the financial markets has played a significant role in augmenting account balances. The global stock markets have witnessed a remarkable recovery from the dip caused by the COVID-19 pandemic. As a result, the investment portfolios held within these accounts have experienced substantial gains, ultimately benefiting American workers.

Another factor contributing to the increase in 401(k) and IRA balances is the growing awareness among Americans regarding the importance of retirement planning. Financial education initiatives by employers and various financial institutions have played a crucial role in educating individuals about the long-term benefits of consistently saving for retirement. This increased awareness has encouraged more Americans to take advantage of these tax-advantaged retirement accounts.

Moreover, legislative measures to incentivize retirement savings have also bolstered the growing trend. The Setting Every Community Up for Retirement Enhancement (SECURE) Act, passed in 2019, introduced reforms aimed at increasing access to retirement savings plans. The legislation encourages small businesses to offer retirement savings programs to their employees. By providing tax credits to small business owners, the SECURE Act incentivizes them to establish retirement plans, ultimately enabling more workers to save for their future.

While the significant growth in 401(k) and IRA balances is certainly promising, it is important to acknowledge the underlying challenges Americans face in retirement planning. Studies have consistently shown that the average American is not adequately prepared for retirement, with many individuals facing the risk of outliving their savings. Despite the uptick in account balances, it is crucial to continue promoting financial literacy and encouraging individuals to take an active role in their retirement planning.

Furthermore, it is important to address existing systemic issues that hinder retirement savings for specific populations. Low-income workers, women, and individuals from marginalized communities often face greater challenges in saving for retirement. By addressing these disparities and implementing policies geared towards greater financial inclusion, we can ensure that all Americans have an equal opportunity to build a secure future.

In conclusion, the all-time highs reached by Americans’ 401(k) and IRA accounts are indicative of the growing importance individuals are placing on retirement planning. With rising account balances and increased financial awareness, Americans are taking significant steps towards securing their financial future. However, it is crucial to continue fostering financial literacy and addressing systemic disparities to ensure that retirement savings remain accessible and inclusive for all.