401(k) balances are rising, but most savers still won’t have enough for retirement

401(k) balances are rising again, after falling last year. The average balance is about $112,000 for people who have accounts with Fidelity (a Marketplace underwriter). That’s up about 8% from a year ago. 

And the number of people with over a million dollars in a 401(k) or an IRA has grown significantly this year, though it’s still tiny — only around 2%. 

We can probably all agree that it’s a good thing when retirement balances go up. But it doesn’t necessarily mean people are saving more, said Rachel Snyderman at the Bipartisan Policy Center.

“A strong economy is doing a lot of the work here,” Snyderman said.

The stock market has had a good year so far, and she said that’s the main reason people’s retirement accounts are growing.

But Mark Iwry at the Brookings Institution said it’s also true that more people are saving for retirement.

“Much of this is due to automatic enrollment,” Iwry said.

Automatic enrollment is becoming increasingly common for employee-sponsored 401(k) plans, and Iwry said it makes a big difference.

For the more than a third of workers who don’t have a retirement plan through their job, “many of us have been working to encourage a nationwide initiative to set up state-based automatic enrollment into IRAs,” he said.

And, Iwry said, some states are doing it. 

Still, there’s a long way to go. Roughly half of Americans 55 and up have no retirement savings.

And most of those who do aren’t saving enough, said Teresa Ghilarducci, a retirement expert at The New School.

“People ask me, ‘How much do I need in my retirement account?'” Ghilarducci said.

And while the answer is going to vary widely, she said for a middle-class person making $70,000 to $80,000 a year who wants to maintain their lifestyle in retirement, “they need a million dollars over and above Social Security.”

“And when the average 401(k) account balance is a tenth of that,” she said, that tells us something big needs to change.