Average 401(k) balances are up to an all-time high of $84,300, according to an analysis done on Fidelity’s 12.6 million retirement accounts. This is up nearly $8,400 from the previous year average of $75,900. The increase can largely be attributed to an outstanding year where the market has gained more than 15%, although employees have been contributing slightly more as well. Workers who have been consistently contributing to a 401(k) plan over the past 10 years saw their average balance climb by 19.6% to $223,100 during the 12 months ended in June. This increase is definitely good news, but it only reflects a privileged sample does not describe the current retirement situation of most Americans. A study released recently by the National Institute on Retirement Security found that the median retirement savings balance is only $12,000 for near retirement households.
Another trend that Fidelity found was the increasing allocation toward target date funds. Currently one third of Fidelity’s 401(k) savers have 100% of their savings in target date funds, compared to 3% a decade ago. Target-date funds have appealed in particular to younger investors, as more than half of Fidelity’s savers age 22 to 34 have all of their assets invested in a target-date fund. While taking a hands-off approach to investing certainly has its benefits, it is also important to remember that just because a target-date rebalances and reallocates automatically, it does not mean that it perfectly corresponds to your individual risk profile. Although they do a good job of approximating an appropriate asset allocation for your age, they target-date funds don’t take into account your income level, existing savings, and many other factors that affect how you invest for retirement.