Higher employer contributions, along with improving market conditions, boosted average individual retirement account (IRA), 401(k), and 403(b) balances in the first quarter of 2023, marking the second straight quarter that workers have raised their retirement savings, according to Fidelity.
- A Fidelity analysis of?44.5 million accounts showed average IRA, 401(k) and 403(b) balances increased in the first quarter of 2023.
- Employer contributions to 401(k)s reached a record 4.8%, with 78% of workers contributing enough to get the full match offered by employers.
- Gen Z led gains compared to other generations, with the average Gen Z 401(k) account up 17% over the quarter.
Fidelity found that the average IRA balance was $109,000, the average 401(k) balance was $108,200, and the average 403(b) balance was $97,900 in the first quarter. In the fourth quarter of 2022, IRAs were at $104,000, while 401(k)s had $103,900, and 403(b)s had $92,700, according to the report which analyzed data from 44.5 million accounts the firm manages.
One key factor driving the increase in retirement account balances was a record level of employer contributions, with 401(k) contributions by employers reached an all-time high of 4.8% in the first quarter.?Close to four-fifths of workers at 78% contributed enough to get the full match offered by their employers. That helped raise total 401(k) saving rates—which include employer and employee contributions—to 14% in the first quarter, up from 13.7% in last year’s fourth quarter.?
More retirement savers also turned to IRAs in the first quarter, increasing 11% over last year’s first quarter, the report found. The most popular retail retirement vehicle was the Roth IRA, with 58.4% of investors choosing the taxes-up-front approach to IRA investing.
Broken down by generation, 401(k) accounts held by Gen Z workers gained the most, adding 17% in the 2023 first quarter. They were up 34% from a year ago, also the greatest annual growth compared to other generations.
“It’s encouraging that today’s younger generations have more financial awareness than any generation before them,” said Joanna Rotenberg, president of Fidelity’s personal investing division.