Increasing contributions and a strong stock market drove both the average 401(k) and individual retirement account (IRA) balance in Fidelity’s book of business over six figures at the end of 2017.

As the firm lays out, the average 401(k) balance rose to $104,300 by year’s end, finishing 2017 fully 13% higher than the close of 2016. The average IRA balance climbed to $106,000, which is also a 13% year-over-year increase, Fidelity says. These numbers compare with an average 401(k) balance of just $77,600 in 2012 and a 2012 average balance of IRAs at $76,600.

Fidelity found long-term 401(k) savers saw particularly significant increases to their average account balance. For workers who have been contributing to their 401(k) for 10 consecutive years, the average 401(k) account balance increased to $286,700, up from $233,900 a year earlier. For individuals who have been in their 401(k) plan for 15 straight years, the average balance rose to $387,100, up from $318,500 in Q4 2016.   

The number of 401(k) savers with at least $1 million in their 401(k) increased to 150,000 at the end of 2017, up from 93,000 a year ago. The number of investors with $1 million in their IRA account rose to 152,000, an increase from 109,000 at the end of 2016.

The data shows nearly one-third of 401(k) savers increased their savings rate in 2017, driving the average deferral to 8.6% in Q4 2017, an increase from 8.4% a year ago. The average IRA contribution rate increased to $1,730 in Q4 2017, up from $1,590 a year ago.

Kevin Barry, president of workplace investing at Fidelity Investments, reminds investors to take these positive numbers in stride. As he stresses, it is “always important for individuals to remember that saving for retirement is a marathon, not a sprint, and that applying a long-term approach to retirement savings strategy helps to put investors in a better position to reach their savings goals.”

In light of record account balances, steps to help keep savings on track

While the average retirement account balance continues to reach record levels, Fidelity highlights several steps investors can take to help keep their savings on track and help ensure they are not over-exposed to a market downturn in the future.

First, while a rising stock market is one reason the average retirement account balance has reached record levels, it may also have resulted in some savers having more stock in their account than they are comfortable with, based on how close they are to retirement and their comfort with risk. Fidelity compared the level of stock among its 401(k) accounts to the Fidelity Equity Glide Path model, which is a range of equity allocations that may be generally appropriate for many investors saving for retirement, and found that nearly a quarter of Fidelity 401(k) savers had equity allocations that were more than 10% greater than the equity glide path. Among Baby Boomers, the percentage increases to 35.6%, while only 17% of Millennials had a higher percentage of equities greater than Fidelity’s equity glide path.

Fidelity further urges investors to think twice before tapping their retirement account, regardless of the fact that the account has grown nicely and may be more tempting as a loan source.

“While tapping a retirement account for a serious emergency is understandable, investors should be fully aware of the possible downsides before taking a 401(k) loan,” Barry adds. “For instance, the amount borrowed could miss out on potential market growth, and if someone leaves a job, the loan may have to be repaid in full in as little as 30 days.”

Fidelity data show many investors also reduce their contribution rate when taking out a 401(k) loan, adding to the negative impact on long-term savings potential.

The final suggestion is likely a very familiar one: Consider a “do it for me” investment option, such as a target-date fund or managed account.

“Target date funds and managed accounts are an increasingly popular way for individuals to leverage professional investment expertise to help them manage their retirement savings,” Barry concludes. “Nearly eight million of Fidelity’s 401(k) savers leverage a do it for me managed solution, and nearly 70% of Millennials hold all of their 401(k) savings in a target-date fund. However, less than 5% of IRA accounts utilize a professionally managed investment option to help maintain an appropriate asset allocation.”