A new Fidelity report revealed that Americans are saving more for retirement than ever before. In the first quarter of 2024, the total average 401(k) savings rate reached an unprecedented 14.2%. This figure encompasses a 9.4% employee contribution coupled with a 4.8% employer contribution, both matching previous highs.
Although slightly below Fidelity’s recommended 15% savings rate, the current contribution rate marks an increase from last year’s 13.9%. Mike Shamrell, Fidelity’s Vice President of Thought Leadership for Workplace Investing, expresses optimism about this trend, stating, “We like to see it continue to inch toward that 15%, which will put people on a great track to reach their retirement goals.”
Robust contributions and favorable market performance have driven the average 401(k) balance at Fidelity to $125,900, the highest since the end of 2021, buoyed by an 11% rise in the S&P 500 this year. This growth in retirement savings reflects both increased awareness and commitment among workers to secure their financial future, despite economic uncertainties.
“A forthcoming survey by Goldman Sachs Asset Management indicates that only half of working baby boomers feel prepared for retirement, with future healthcare costs being their primary concern.”
However, a significant portion of the American workforce remains without access to a 401(k) or similar retirement plan. Only about 50% of U.S. workers are enrolled in such plans, highlighting a gap in retirement preparedness. According to the 2024 Retirement Confidence Survey by the Employee Benefit Research Institute, 85% of workers with a retirement plan have saved money for retirement, compared to just 20% of those without a plan.
The lack of participation in retirement plans is a concern for many financial experts. They argue that broader access to retirement savings programs is crucial for ensuring long-term financial stability. Employers and policymakers are urged to find ways to increase participation rates, whether through automatic enrollment features, matching contributions, or enhanced education about the importance of saving for retirement.
A Federal Reserve survey revealed that 34% of non-retirees felt their retirement savings were on track in 2023, up from 31% in 2022 but down from 40% in 2021. Inflation was the most common financial concern among participants in the Fed’s Economic Well-Being of U.S. Households in 2023 report. This indicates a mixed sentiment among Americans about their financial readiness for retirement, with inflation eroding purchasing power and increasing living costs.
A forthcoming survey by Goldman Sachs Asset Management indicates that only half of working baby boomers feel prepared for retirement, with future healthcare costs being their primary concern. This demographic faces unique challenges as they approach retirement age, including the uncertainty of medical expenses and the adequacy of their savings to cover such costs.
The surveys highlight the need for a more robust approach to retirement planning, especially as life expectancies increase and healthcare costs continue to rise. Meet with an FRC® trained advisor to craft a retirement plan that ensures a smooth transition into your retirement years.
