401(k) millionaires galore

Pop the top-shelf champagne: A record number of 401(k) accounts ballooned to seven figures, minting more millionaires than ever.

Fidelity found that 654,000 Americans became 401(k) millionaires in Q3. That’s just 1.25% of its 52 million retirement account holders, who spent roughly 25 to 26 years patiently padding their nest eggs paycheck by paycheck. The number of IRA millionaires also hit a new record at 559,181. Even regular Joes still light years from millionaire status shouldn’t feel too bad: average balances hit their own records of $144,400 for 401(k)s and $137,902 for IRAs.

But here’s the catch: Saving a million bucks isn’t the end-all-be-all milestone it used to be. A conservative withdrawal rate of 5% would amount to just $50,000 per year—which won’t get you far during retirement amid the spiraling costs of healthcare, housing, and inflation. People are also living longer and may need that cash to stretch for 30+ years. And don’t forget that Social Security faces 23% cuts in 2033 unless Congress acts.

Bottom line? A million bucks is great, but you’d better keep going.

There’s another surprise: Gen Z—long teased as being slow to get hitched, buy a home, and have kids—is actually the generation most on track to retire in style. Vanguard found that 47% of workers aged 24 to 28 are currently poised to maintain their current spending habits in retirement, followed by 41% of Gen X (aged 45 to 60) and 40% of baby boomers (61 to 65).

But this doesn’t mean Gen Z are better savers. Kudos instead go to the growing number of companies auto-enrolling employees in 401(k) plans, banking on the fact that workers are too lazy to opt out. Vanguard found that 92% of auto-enrollees were still socking away money three years later, versus just 29% who had to voluntarily sign up. Given how tough it’s gotten to save enough money for retirement, maybe we should take all the help we can get.—JD