The stock market has seen significant growth in the first two quarters of 2024. This has created a positive impact particularly for those with 401(k) plan savings. The upward trend even continued into the third quarter surprising many investors. This remarkable growth has motivated many to reassess their investment strategies and focus more on the stock market.
According to Fidelity Investments, the average balance for a 401(k) by the end of Q2 2024 was $127,100 — a 13% increase from the same period in the previous year. This accompanied a 1% increase from Q1 following a substantial 16.4% rise from the previous year.
President of Workplace Investing at Fidelity Investments, Sharon Brovelli, suggests that the rise in average account contributions is due to individual commitment towards retirement savings. She also praises the resilience of the market and individual investors for seizing investment opportunities despite uncertainties.
Furthermore, greatly due to the favourable economic conditions, the median 401(k) plan balance stood at $29,200 by the end of Q2.
Boosting retirement savings through stock market growth
This is a 17% increase from 2023. The lower value is attributed to recent enrollees with lower account balances. Nevertheless, the upward trend indicates positive movements in retirement savings.
Individual Retirement Accounts (IRAs) also saw a rise in average balance at the end of Q2, it reached $129,200. This reflects a minor 1% increase from Q1 but a significant 14% boost from the similar quarter in 2023.
This rise in retirement plan totals aligns with the performances of key stock indices particularly in Big Tech shares such as Nvidia, Meta Platforms, Microsoft, and Amazon. This is promising for portfolio diversification as they continue to deliver substantive returns.
Unfortunately, the allure of growing retirement account balances has led to premature depletion of some accounts. Roughly 18.3% of employees with 401k have used their savings for various reasons. This highlights the need for financial education and understanding of potential consequences of early withdrawals which have high cost implications and end up limiting eventual financial security.
