Average 401(k) balance hits record high as stock market surges

The surging stock market has helped push 401(k) balances to record highs, according to one report -- positive news for baby boomers and others nearing retirement.

Fidelity Investments, the nation’s largest 401(k) provider, said the average balance of 401(k) accounts it administers was $84,300 at the end of September, up 11% from a year earlier. Workers who were continuously active in their 401(k) plans for the past 10 years saw their accounts gain 20% in the past year to an average of $223,100, Fidelity said in a news release.

For pre-retirees age 55 or older who have been active in their plan for at least 10 years, the average balance was $269,500, the company said.

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The gains were due in large part to the stock market, which has been on fire this year. The broad S&P 500 index is up 25% year-to-date and has more than doubled since bottoming out in 2009.

In the past few decades, many employers have phased out company-funded pension plans in favor of 401(k) accounts, in which employers and workers stash pre-tax cash to help fund employees’ retirements.

Many workers have expressed confusion about the myriad investment options in the accounts. Fidelity said it has seen an increase in the use of target-date funds, in which investment firms model ideal stock and bond holdings based on workers’ estimated retirement dates.

One-third of employees in Fidelity 401(k) accounts now utilize target-date funds, up from just 3% 10 years earlier, the company said.

“Today’s 401(k) plan is profoundly different than it was a decade ago,” said James MacDonald, president of Fidelity’s workplace investing division. “Plan design has evolved greatly to reflect the fact that 401(k) plans are often the primary driver of retirement savings for most working Americans. Professionally managed investment options can help working Americans achieve better retirement outcomes by creating a diversified portfolio, which is often the most challenging aspect of participating in a workplace retirement plan.”

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