The average 401(K) balance shot up by 15 percent in 2023 thanks to a booming stock market and an increase in workers contributing to their plans.
New data from Bank of America (BofA) shows savers had $86,820 in their accounts on average by the end of 2023, up from $75,045 in the same period in 2022.
And earnings were bolstered by a booming stock market which saw the S&P 500 end the year up 24.2 percent.
The findings come after a turbulent few years for America’s retirement savings as soaring living costs forced many taking loans and hardship withdrawals from their plans to make ends meet.
But the latest data from BofA suggests the tide is starting to turn. The percentage of savers borrowing from their plans decreased from 2.5 percent to 2.3 percent between the third and final quarter of 2023.
The average 401(K) balance shot up by 15 percent in 2023 thanks to a booming stock market and an increase in workers contributing to their plans
Similarly, the percentage of hardship withdrawals declined from 0.59 percent to 0.57 percent.
Lorna Sabbia, head of retirement and personal wealth solutions at BofA, said: ‘We were encouraged to see more plan participants taking positive actions in their accounts in the fourth quarter.
‘These insights offer signs that people are prioritizing their retirement savings, with more employees increasing their contribution rates and fewer taking hardship distributions.’
BofA’s Participant Pulse report uses data from 4 million people signed up to its clients’ employee benefits programs.
It comes after a separate report by Fidelity Investments found that the number of savers with $1million in their retirement accounts ballooned by around 100,000 people in 2023.
Some 349,000 401(K) owners and 339,000 workers with an Individual Retirement Accounts (IRA) ended the year with seven-figure balances, according to Fidelity Investments.
While it marks a slight decline from earlier in the year, the number is still well above 2022 levels when the figures were 299,000 and 280,000 respectively.
A 401(K) is an employer-sponsored plan which workers often contribute to directly from their paycheck. A worker’s contributions are often matched by the employer.
By comparison IRAs can be opened by anybody including freelance workers.
Those that have managed to stash away a comfortable nest egg insist it is not as difficult as it seems.
Caroline Eby told DailyMail.com that she is edging closer to the $1 million mark – despite never earning more than $80,000 in her life.
The number of savers with $1 million in their retirement accounts ballooned by around 100,000 people in 2023 as they were bolstered by a booming stock market
Caroline Eby, 57, pictured, told DailyMail.com that she is edging closer to the $1 million mark – despite never earning more than $80,000 in her life
The finance worker, from Washington D.C., said: ‘I started saving at age 25 when I was making $22,000 a year in manufacturing.
‘Each year, I upped my contribution by 2 percent if I could afford it. I maxed my contribution somewhere around 12 percent.’
She added: ‘I’ve never married and have always fully supported myself. I’m so happy and proud of myself for the sacrifices I made 30 years ago.
‘Like everyone told me, slow and steady wins the race.’
Eby had $990,000 in her account two years ago but then lost $100,000 – something she blamed on the wider economy. Now, her account is ‘on its way back up,’ she said.