Retirement accounts are on the rise
During times of financial crisis, many people take things one day at a time, focusing on paying this month’s bills and buying necessities for right now. In addition, when faced with debt, many people in Georgia and throughout the country choose to take money out of their 401(k) and other retirement accounts in order to make ends meet.
While focusing on today is certainly understandable, it may leave many people vulnerable to bankruptcy, foreclosure, or other financial misfortune in the future, especially with the current uncertainty surrounding the Social Security program. Therefore, economists have been watching retirement accounts closely, hoping to determine whether Americans are headed for financial distress when they reach retirement.
Right now, it appears that retirement accounts are on the rise. According to recent reports from retirement giant Fidelity, which manages the retirement plans of approximately 11 million people, U.S. 401(k) retirement savings accounts now contain an average of $74,900. This is the highest average account balance recorded since the company began tracking the data in 1998.
The average balance has increased by 12 percent from one year ago, Fidelity says. Of this increase, approximately two-thirds was due to market gains and one-third to increased contributions by account holders.
According to Fidelity vice president Beth McHugh, the average account balances are higher among older workers. For those who have had a retirement plan for at least 10 years, the average account balance is $190,000, an increase of over $20,000 from just a year ago. In addition, account holders over the age of 55 had an account balance of $233, 800, an increase of $30,000 from last year.
Despite the increases, Fidelity accounts are still showing signs of economic stress. Approximately 22 percent of account holders have borrowed money from their 401(k) accounts, and 3.2 percent have cut their contributions in the past quarter.
Source: Reuters, “Average 401(k) balance near $75,000: Fidelity“, Ross Kerber, 11 May 2011