In a landscape often filled with
grim retirement news
, Fidelity Investments
reported this week
that the average balance of the 401(k) accounts it manages has hit
a 12-year high.
But while the increase in balance amounts is one positive
development, there are still reasons to doubt that Americans are
saving enough for retirement. Several recent studies have suggested
that savings rates need to rise sharply before most Americans can
expect to comfortably exit the workforce at 65.
Employer contributions rise nearly 20 percent in five
Fidelity analyzed data from 12 million 401(k) accounts from
across more than 20,000 corporate defined contribution plans to
determine that not only are account balances on the rise, but both
employee and employer contributions have increased as well.
As of the end of the third quarter of 2012, Fidelity 401(k)
accounts had an average balance of $75,900. That number is up from
$64,300 a year ago and represents the highest account balance
recorded by the company since it began tracking these amounts 12
While balances may be growing in part to changes in the market,
increased employee and employer contributions have also likely
helped. Employees now contribute an average of $5,900 annually to
their accounts, up 7.3 percent from 2007.
Meanwhile, employers are pitching in almost 20 percent more than
they did five years ago. The average annual employer contribution
is now $3,420.
But is it enough?
Although the increase in 401(k) contributions is good news, it
begs the question of whether it makes much difference to the state
of retirement savings. The Fidelity analysis does not indicate the
average age of account holders, but a balance of $75,000 is well
below what financial advisers typically recommend for people
With the future solvency of Social Security remaining a question
mark, today's younger workers may be well advised to carefully
calculate their financial needs for retirement
. Unfortunately, for many middle-income workers, saving more
appears to either not be a priority or a possibility.
study from LIMRA
, a research and consulting firm in the financial services
industry, found 65 percent of workers earning between $40,000 and
$99,999 annually are saving less than 5 percent of their income for
retirement. In addition, 22 percent say they are saving
"These results, while not surprising, are very troubling," said
Matthew Drinkwater, associate managing director of LIMRA's
retirement research, in a written statement. "Less than 30 percent
of American workers have a traditional defined benefit retirement
plan that could help them pay for their expenses in retirement, so
the responsibility for providing the financial resources for
retirement lies squarely on the individual."
While the Fidelity analysis shows a promising trend in
increasing 401(k) balances, the LIMRA study and other similar
reports indicate workers may have a long way to go until they can
be confident of their ability to retire with financial