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Coupled With A Strong Stock Market, Baby Boomers’ 401(k)s On The Rise

By putting more of their money towards retirement, baby boomers are experiencing their 401(k)s on the rise.

Now for some good news: 401(k)s are on the rise.

Baby boomers are setting aside more of their paycheck towards their 401(k) and coupled with a rising stock market, their balances are on the upswing.

The latest report from Fidelity Investments shows those born between 1946 and 1964 had an average balance of $151,200 in their 401(k) during the fourth quarter of 2014. That’s an increase of 6 percent over 2013 and a gain of 67 percent since the end of 2009 when the average balance was $90,600.

Fidelity credited the stock market performance for 60 percent of the latest gains and 40 percent to people increasing their contributions to their work-based retirement plans.

The average baby boomer in the Fidelity plans contributed $8,120 to their 401(k) in 2014, up from $7,900 or 2.7 percent. The average contribution was $6,670 a year in 2009, meaning contributions have increased 22 percent since the Great Recession.

When combined with employer contributions, the average in 2014 was $12,510, up from $12,130 in 2013 and $10,130 in 2009.

“We are seeing some positive trends with the boomers and how they’re getting engaged as they get closer to retirement,” says Fidelity spokesman Mike Shamrell.

In another good indication of older employees, the average balance for those in a plan for ten years or longer was $248,000, an 11 percent increase over 2013.

“There are plenty of people who would argue whether $248,000 is enough to retire on,” Shamrell says. “It’s probably not but it’s definitely a good spot to work from.”

For all age groups, Fidelity says 401(k) balances hit record levels in 2014 and IRA balances continued to grow.

The year-end average 401(k) balance was $91,300, a 2 percent increase over 2013 in setting its record. The average IRA balance was $92,200, a 4 percent increase over 2013, says Shamrell.

The company also says the average savings rate increased to 8.1 percent, the highest since the end of 2011. When combined with employer contributions, the average employee savings rate was 12.2 percent of their salary in 2014, Shamrell says.

“It’s always great to see the behavioral indictors pointing upwards whether it be the average balance or average contribution rate and average savings rate,” Shamrell says. “Whenever that’s the case, it’s a good sign and shows a lot of people are starting to understand and taking the right steps to save for their retirement.”

What’s pointing to that is how there’s been a 15 percent increase in people reaching out for guidance with their retirement, Shamrell says. It shows people are taking retirement seriously and looking for expert help to put them in the best position to reach their retirement goals, he says.

“That’s something we stress is that while $91,300 is an all-time high, no one feels that is enough to retire on,” Shamrell says. “That’s an average. It gives an indication of the overall landscape, and it’s only measuring those active within their company’s 401(k). We’re headed in the right direction but we still have work to do.”

Fidelity says its plans involve 13 million people and since just under three million sought out help, that’s a reflection of people realizing they don’t have a company pension like their parents did and need to take more responsibility for their own retirement, Shamrell says.

“They know they need to take positive steps to put them on the right track to reach whatever goals they have for retirement,” Shamrell says.

Jim MacDonald, president of Workplace Investing for Fidelity, says a variety of economic conditions such as lower unemployment and a record-setting stock market performance made it a good year for retirement savers.

“However, it’s important to remember to take a long-term approach to retirement savings, and not react to short-term market swings,” MacDonald says. “The typical American worker will see markets go up and down many times during their career, so commitment to a long-term savings and investing strategy will put individuals in the best position to meet their retirement goals.”

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