In an analysis of the 22,600 401(k) plans that Fidelity Investments administered as of the end of the second quarter, 33% automatically enrolled new employees into their plans, up from 15% in 2008. Among the largest companies, those with more than 50,000 employees, 61% automatically enrolled participants.
The average default savings rate ticked up to 3.9% after five straight quarters at 3.8%. Among mid-sized companies, those with 25,000 to 50,000 employees, the average default deferral rate is 4.6%. In addition, the percentage of employers that default participants at a 6% deferral rate or higher more than doubled in the past decade to 19%.
Plans with automatic enrollment had an 87% participation rate as of the end of the second quarter, whereas plans without automatic enrollment had a participation rate of 52%. At the end of 2017, 87% of Millennials in plans with automatic enrollment were participating in the plans, whereas 41% of Millennials in plans without this feature were participating.
Since 2008, the average savings rate among employees automatically enrolled has risen from 4% to 6.7%, and 63% of automatically enrolled participants in the past 10 years have increased their savings rate.
“As retirement savings plans continue to evolve to meet the changing needs of today’s workforce, it’s clear the one feature that has really had a positive impact on the retirement landscape over the past decade is auto enrollment,” says Kevin Barry, president of workplace investing at Fidelity Investments. “Auto enrollment positioned an entire generation of workers to build their retirement nest eggs.”
As of the end of the second quarter, the average 401(k) balance was $104,000, just under the all-time high of $104,300 in the fourth quarter of 2017. The average balance is up 6% from a year ago. The average individual retirement account (IRA) balance was $106,900, a 2% increase from the first quarter of the year and nearly a 7% increase from a year ago. The average 403(b) account balance was $83,400, nearly a 2% increase from the first quarter and a 5% increase year-over-year.
The percentage of workers with an outstanding 401(k) loan dropped to 20.5%, the lowest percentage since it was 19.9% in the second quarter of 2009. Among Gen X workers, who have historically had the highest outstanding loan rate, the percentage dropped for the third straight quarter to 26.%. The percentage of new loans initiated dropped for the second straight quarter to 9.7%, the lowest mark since the first quarter of 2017.
More Millennials are turning to IRAs for retirement savings. Their average balance as of the end of the second quarter was $15,150, a 9% increase from the previous quarter. The number of Millennials making contributions to an IRA increased 19% from a year ago.
The number of people with $1 million or more in their 401(k) increased by 49,000 people from a year ago to 168,000. Twenty-one percent of those people are women.
Among IRA holders, the number of people with $1 million or more in their account was 156,000, 26% of whom are women.
“The stock market’s performance over the past several years has definitely helped retirement savers, but now would be a good time for investors to take a moment and make sure they are doing their part to meet their retirement goals,” Barry says. “Markets may go up and down, but there are a number of steps individuals can take, such as considering a Roth IRA, increasing your savings rate and avoiding 401(k) loans, which can play an important role in their long-term savings success.”
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