The number of retirement investors with at least $1 million saved in their Fidelity Investment accounts hit a record high in the third quarter, even as the pandemic’s second wave approached and the economic outlook remained uncertain.
The number of so-called 401(k) millionaires increased 17% to 262,000 from 224,000 in the second quarter, according to an analysis of more than 30 million retirement accounts at Fidelity provided exclusively to Yahoo Money. The number of IRA millionaires also increased by 15% to 234,000 from 204,000 in the second quarter, marking a 15% jump.
The previous records for both were in the fourth quarter of 2019, when there were 233,000 401(k) millionaires and 208,000 IRA millionaires.
“There are a few things at play here, including basic market growth,” said Emily Franco, financial advisor at Fort Pitt Capital Group. “When comparing the third quarter 2019 to the third quarter 2020, we’ve seen the [stock market] indexes reaching close to all-time highs, despite the bumpy ride we had this spring and summer.”
The increases occurred during July, August and September when more than 14 million Americans filed for jobless claims, according to data by the Federal Bank of Saint Louis. At the same time, the Standard and Poor’s 500 index increased about 8.1%.
Retirement accounts overall got a boost
For all retirement investors, their average account balances also increased. IRA balances rose 6% to $117,700 from the second quarter’s $115,000. This was a 7% uptick from a year ago at $110,200.
401(k) balances had a slightly smaller increase. The average balance rose by 5% to $109,600 in the third quarter, up from $104,400 in the second quarter and up 4% from a year ago.
About 9 in 10 investors also left their contribution rate to their retirement accounts unchanged, despute the unprecedented environment.
“It’s encouraging to see average account balances increase slightly over the quarter and many individuals continuing to save in the face of the challenges posed by the pandemic, especially as many organizations, as well as their workers, are struggling in the current business environment,” said Kevin Barry, president of workplace investing at Fidelity Investments.
Many boomers over-allocated in stocks
The study also found that 38% of baby boomers were over-invested in stocks based on their age. But that kept them in position to reap the gains from near-market highs. About 1 in 12 of boomers were 100% invested in stocks.
About a third of boomers did shift some of their savings into more conservative investments during the pandemic, the study found.
Those who are on the higher-income end of the spectrum were more likely to invest a generous sum in stocks, Franco said.
“While of course, this is a much easier goal to attain when you are a high-income individual, that does not mean it is unattainable for someone with a more modest income,” Franco said. “By maxing out your annual retirement contributions and staying invested even during market downturns, you increase your chances of having enough retirement assets left over to provide for both your own retirement and to pass on to future generations.”