• Market Crumbs

There's A New Record Number Of 401(k) Millionaires

Image via Viacheslav Bublyk on Unsplash

Saving money for retirement is one of the most important things to do in life. Unfortunately, many people don't have the means or jobs providing retirement benefits to do so. There's countless articles on the low percentage of Americans, both working and already retired, who have little or nothing saved for retirement.

For the subset of Americans who do have retirement savings, times are good. As a matter of fact, they've never been better.

Fidelity Investments, the largest individual retirement account (IRA) provider in the United States, released its quarterly analysis of retirement savings trends, which shows a slew of records being broken as the stock market continues to make all-time highs.

The average 401(k), IRA and 403(b) balance hit record levels as of December 31. The average 401(k) balance stood at $112,300, up 7% from the same period a year earlier and 79% since 2009. The average IRA balance rose to $115,400, up 5% from the same period a year earlier and 81% since 2009. The smallest average balance, but highest returns, came from 403(b) accounts, which saw the average balance rise to $93,100, a gain of 6% from the same period a year earlier and 92% since 2009.

As a result, the number of 401(k) and IRA millionaires also reached a new record high. There are now a record 233,000 people with $1 million or more in their 401(k), up from 200,000 people in the previous quarter and 21,000 people at the end of 2009. There are also a record 208,000 people with $1 million or more in their IRA, up from 182,400 people in the previous quarter.

"The growth in savings levels over the last 10 years demonstrates the positive impact of taking a long-term approach to retirement, and recent Fidelity research demonstrates workers who do so have reason to feel increasingly confident about their retirement readiness," said Kevin Barry, president of Workplace Investing at Fidelity Investments. "However, as we enter a new decade and continue to see markets rise and fall, it’s more important than ever to remember some of the important elements of a successful retirement strategy – these include maintaining positive savings habits, ensuring your account has the right balance of stocks, bonds and cash, and continuing to focus on your long-term savings goals."

Digging into the data shows some interesting stats. The percentage of millennials contributing to an IRA jumped 21% from the same period a year earlier. 73% of millennials' contributions went to Roth IRAs. The average 401(k) balance for millennials who have been in their 401(k) plan for 10 years reached $149,800, another record high. The report also shows people are saving more. The average employee savings rate hit a record 8.9%, with the average total savings rate—which takes into account employer matching, tied the record of 13.5%, which was set in the second quarter of 2019.

Despite all of the records that were broken last quarter, many Americans are not in such a comfortable position. Fidelity knows more has to be done, with Barry saying, "Millions of people rely on a 401(k), 403(b) or IRA as primary vehicles for retirement savings, so the industry needs to continue to find ways to make these accounts more accessible, more efficient and easier to use."

Leftover Crumbs

  • What changed? Tesla is taking advantage of its recent short squeeze by raising $2 billion in a stock offering. Tesla co-founder and CEO Elon Musk said last month "It doesn’t make sense to raise money. Diluting the company to pay down debt doesn’t sound like a wise move." Tesla will offer 2.65 million shares at $767 per share, with Musk opening his wallet to purchase up to $10 million worth. Tesla also revealed the Securities and Exchange Commission subpoenaed the company on December 4, seeking information concerning "certain financial data and contracts including Tesla's regular financing arrangements." In the old days these two headlines would cause a stock to go down, but not Tesla, as shares finished the day nearly 5% higher and more than 9% off the opening low.

  • Did they miss their window? Costs are growing faster than revenue at Airbnb as the startup reportedly lost a staggering $322 million over the first nine months of 2019, according to the WSJ. The company's board is reportedly questioning executives as the company posted a $200 million profit in 2018. Airbnb was valued at $31 billion in its last funding round in 2017, but is reportedly valued lower internally. Airbnb, which previously said it "expects to become a publicly-traded company during 2020," may delay its listing as coronavirus has affected its business in the quickly-growing Chinese market.

  • They don't want to miss the boat on sports betting. CBS has struck a partnership with British bookmaker William Hill,  making it the official sports book and wagering data provider for CBS Sports. CBS Sports is the second-largest digital sports property in the U.S. with more than 80 million monthly users. "The power of our distribution, combined with the strength of our brands and the expertise of William Hill, has us well positioned to tap into the explosive growth of the legal sports betting industry in the U.S.," said Jeffrey Gerttula, Executive Vice president and general manager of CBS Sports Digital.

  • JEDI mind tricks. Amazon has received its wish, as a judge ordered a temporary block of the Joint Enterprise Defense Infrastructure (JEDI) contract after Amazon filed a lawsuit last month to freeze the contract. Amazon believes the contract was unfairly awarded to Microsoft, believing they were not selected in part because founder and CEO Jeff Bezos' criticism of the Trump administration through The Washington Post, which he owns. "All we’re trying to do through this protest and this request for a legal review is to ensure that a proper decision was made on behalf of U.S. taxpayers," said Amazon spokesperson Jay Carney. The Pentagon declined comment on the ruling.

  • Yikes. Barclay's CEO Jes Staley is being probed by U.K. regulator the Financial Conduct Authority for his ties to Jeffrey Epstein. Staley had a "professional relationship" with Epstein but reportedly did not have contact with him since joining Barclay's. "As has been widely reported, earlier in his career Mr. Staley developed a professional relationship with Mr. Epstein. In the summer of 2019, in light of the renewed media interest in the relationship, Mr. Staley volunteered and gave to certain executives, and the Chairman, an explanation of his relationship with Mr. Epstein," the bank said.