The 411 on 401(k)s

Published on: Jan 28, 2019
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The 411 on 401(k)s


Retirement accounts in the U.S. reached record highs by the end of 2018’s third quarter. The average account balance was $106,500 for 401(k) plans, and the number of 401(k) millionaires in the U.S. increased to 187,400, up 41 percent from 2017.

Among 401(k) investors, one of the most common trends is the use of target-date funds. This type of fund is comprised of a mix of underlying stock and bond funds that gradually transfer to a more conservative allocation as the fund’s target retirement date grows closer. Fidelity Investments reports that more than 50 percent of participating workers use a target date fund as their sole 401(k) investment. Some say the introduction of these funds has been instrumental in shepherding investors into a more age-appropriate mix of securities, while past investors tended to allocate too much money in higher-risk equities.


Recent data shows long-term 401(k) investors are seeing significant rewards. The average balance for 10-year account holders is $305,400, while those saving for 15 years average just over $400,000. 401(k) investors with $1 million or more have generally been saving for 30+ years.1

Workers may contribute even more in 2019. The IRS increased the maximum limit for 401(k), 403(b) and most 457 plans from $18,500 to $19,000. Those who are age 50 or older may contribute an extra “catch-up” amount up to $6,000.2

However, most 401(k) participants don’t take full advantage of the maximum annual contribution. According to Vanguard:3

  • Only 4% of savers who earn up to $50,000 a year max out their 401(k) contribution
  • Only 11% of those earning between $50,000 and $100,000
  • Only 32% of those earning $100,000 or more


Despite the weak numbers, these workers are likely better off than the rest of the population. Only 14 percent of U.S. employers offer a 401(k) plan at all. Unless you work for a relatively large company, you may not have the opportunity to save in a workplace retirement plan and benefit from matching employer contributions.4


1 Kelli B. Grant. CNBC. Nov. 5, 2018. “Ranks of 401(k), IRA millionaires swell as average retirement account balances hit new high.” Accessed Dec. 15, 2018.

2 Fox Business. Nov. 1, 2018. “IRS increases retirement contribution limits for 2019.” Accessed Dec. 15, 2018.

3 Ben Carlson. Marketwatch, July 29, 2018. “This is what it really takes to become a 401(k) millionaire.” Accessed Dec. 15, 2018.

4 Sarah O’Brien. CNBC. Jan. 31, 2018. “Trump cites 401(k) gains, yet most workers don’t have one.” Accessed Dec. 15, 2018.


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