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Record High Balances Being Seen Among 401k Plans

Record High Balances Being Seen Among 401k Plans

| August 14, 2017
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It seems more and more people are taking their retirement savings seriously, and implementing the help of a 401(k) plan to do so, according to a recent report from Fidelity Investments. Data from 2016 showed all time high balances averaging $95,500, up several thousand dollars from the year before. And while 401(k) plans are a key element in a solid retirement plan, research shows less than half of workers (within the private sector) are taking part in their employer plan. For those who are taking part, the Fidelity Investment report also showed they are not contributing enough money, diminishing the plan’s employer match and losing money in the long run. So how can someone make the most out of a 401(k) plan and what is causing the recent upswing in balances? Let’s take a closer look:


The Reasons Behind Balances Trending Upward

The most recent Fidelity report shows an average balance increase of $3000 between the end quarter of 2016 and first quarter of 2017. It is believed this trend occurred for several reasons. First, the stock market/Dow Jones Industrial Average has been climbing since mid-November. Second, during the past year, 27 percent of workers have made a conscious effort to save more in their 401(k) plan. While this trend towards extra savings may just have to do with the desire to have a solid retirement fund, it could also have to do with a feature available on some plans called auto-escalation.

Auto-escalation automatically increases your contribution by 1 percent at chosen intervals until it reaches the plan’s maximum contribution. If you are currently enrolled in your employer’s 401(k) plan, be sure to ask whether auto-escalation is a feature. If not, some companies offer the SMART program. In this program, you agree to increase your contribution rate in the future, and most choose to do so at a time that coincides with his or her next raise.

How to Make the Most of a 401(k) Plan

When enrolled in a 401(k) plan, determine if auto-escalation is allowed within your company’s plan. If not, make a commitment to increase your contribution to the plan on your own. Even increasing this contribution by just a percentage point can create considerable amount difference when it comes time to retire.

Next, learn more about your company’s retirement contribution rate to make sure you are contributing enough in order to take advantage of the company’s match. If you aren’t saving enough for the match, create a plan to increase your contributions in order to get the benefits of the company match. Once you have successfully tackled the company match feature, you can then look at your budget to see when/how you may be able to contribute more.

Last, speak with a financial advisor about other ways to increase your retirement savings, for instance, by opening an IRA or Health Savings Account. These two solutions are tax-advantaged options that can increase the size of your retirement nest egg. An IRA is available in two options, a Roth IRA or Traditional IRA, and allows you to save money for retirement on either a tax-deferred basis or tax-free basis. A Health Savings Account, typically called an HSA, is another great option to reduce your taxable income and save money to be used for medical expenses. Contributions to an HSA are pre-tax/tax-deductible, grows tax-free and the money can be taken out tax-free (speak to your financial advisor for more information about this). HSAs have become a hot option in investing for retirement because they can be invested in stocks, mutual funds and other investment options.

(Credit: Fidelity - )

No matter your age, creating a solid retirement fund is possible through implementing a variety of investment vehicles. Work with a financial advisor today to create a retirement savings plan that fulfills your needs and desires. Learn more about 401(k) plans, IRAs and Health Savings Accounts in order to maximize your retirement savings at


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Matt Logan is a Representative with Matt Logan Inc., and Summit Brokerage and may be reached at, 336-540-9700 or [email protected].   

Matt Logan Inc is an independent firm with Securities offered through Summit Brokerage Services, Inc., Member FINRASIPC. Advisory services offered through Summit Financial Group Inc., a Registered Investment Advisor. Summit Brokerage Services, Inc., its affiliates and Matt Logan Inc. do not give tax or legal advice. You should consult an experienced professional regarding the tax consequences of a specific transaction. These are the views of Matt Logan Inc, and not necessarily those of Summit Brokerage Services, Inc. and any of its affiliates and should not be construed as investment advice.

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