Employee retirement savings hit record high

Employees are socking away more in their retirement accounts than ever, a new analysis finds–a strong indicator of headway from both workers and their employers.

Nearly a third of 401(k) savers increased their savings rate last quarter, according to new data out last week from Fidelity Investments. The average 401(k) contribution rate is now 8.8%, not including the employer match. That’s nearly a full percentage point higher than a decade ago and the highest percentage ever. On top of that, employers are on average contributing another 4.7%, bringing the total contribution to 13.5%. The analysis is based on data from the more than 30 million 401(k) accounts administered by Fidelity Investments.

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The increase is a “great indication of how focused Americans are getting about saving for retirement,” says Kevin Barry, president of workplace investing at Fidelity, noting that increasing contribution rates by even 1% can make “a big difference” in employees’ long-term retirement savings.

“What may seem like a small amount today can have a significant impact on your account balance in 10 or 20 years,” he says.

Among participants who have been in their 401(k) plan for 10 years straight, the average balance reached $305,900, more than five times the average balance of $59,900 for the same group 10 years ago.

Meanwhile, the number of Fidelity 401(k) plans with a balance of $1 million or more jumped to a record 196,000 as of June 30, up 17% from 168,000 last year.

Increased employer focus on employee savings is also having a big impact. In part spurred by dismal reports about employee retirement savings, more employers have stepped up financial wellness efforts in order to help workers save for their post-work years while also paying off loans and saving for expenses.

“There has been a huge focus from many employers to provide financial education to their employees across a broad spectrum of topics including budgeting, debt reduction and healthcare costs,” says Meghan Murphy, a vice president at Fidelity Investments, adding that she’s encouraged by the increase in contributions.

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Auto-enrolling employees in a company’s 401(k) is also helping increase savings. It’s a strategy that should be embraced more by employers, Murphy says.

“Auto-enrollment is a great way to get people saving and automatic increase programs help to increase savings in small amounts along the way,” she says. “We’re seeing more employers auto-enroll their employees at higher savings rates in an effort to help them reach their retirement savings goals.”

While a 3% default contribution rate is still the most popular among employers, the percentage of employers defaulting at this rate has dropped to 44%, according to Fidelity.

Encouragingly, more than 20% of employers are using a 6% savings rate for auto-enrollment.

“This is more than three times higher than we saw 10 years ago and a trend we expect to continue growing,” Murphy says.

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Kathryn Mayer
Kathryn Mayer is HRE’s former benefits editor and chair of the Health & Benefits Leadership Conference. She has covered benefits for the better part of a decade, and her stories have won multiple awards, including a Jesse H. Neal Award and honors from the American Society of Business Publication Editors and the National Federation of Press Women. She holds bachelor’s and master’s degrees from the University of Denver.