A growing number of retirement savers are sitting on a cool million or more in their IRAs or 401(k)s.
IRA account holders at Fidelity with $1 million or more saved jumped to 398,594 at the end of June, up from 376,275 at the end of the first quarter, according to Fidelity Investments.
That nearly 6% bump is significant. It’s more than double the uptick in those with seven-figure balances in Fidelity 401(k) plans.
There were 497,000 millionaire retirement savers in Fidelity 401(k) plans at the end of the second quarter, up from 485,000 at the end of March — a 2.5% increase.
Fueling the bulging balances in retirement accounts was another robust quarter of market returns and consistent contributions, Rita Assaf, Fidelity’s vice president of retirement products, told Yahoo Finance.
Savers were able to hit this lofty level by starting early and contributing consistently over many years, she said.
Total average 401(k) savings rates, for example, held steady from earlier this year at 14.2%, a combination of employee and employer 401(k) contributions.
The rising IRA balances, however, are noteworthy because that’s money people are saving and investing on their own, without the help of employer-matching funds.
Read more: These are the new traditional IRA and Roth IRA limits in 2024
DIY saving, not necessarily by choice
Roughly 1 in 6 workers are not offered any retirement benefits, with a significantly higher percentage among Generation Z (20%) and baby boomers (30%), according to a recent report by the Transamerica Center for Retirement Studies.
“That’s a real concern and demands a do-it-yourself approach when it comes to saving and investing for retirement,” Catherine Collinson, CEO and president of Transamerica Institute, told Yahoo Finance. “Without an employer and employer-sponsored retirement benefits, it’s easy to do nothing,” she said.
You can open any of these retirement accounts through your local credit union or bank. Mutual fund companies and brokerage firms are also good places to do so. An IRA is easy to set up online: Enter your bank details, how frequently you want to invest, and the amount you want to transfer into your IRA.
Also, some states offer IRA programs that are open for self-employed people. These include Oregon, Colorado, Connecticut, Maryland, Illinois, California, and Virginia.
At Fidelity, 12.3 million people are saving and investing for retirement through 15.8 million IRAs, where the number of accounts rose 11.7% and total assets jumped 22.2% between the second quarter of 2023 and the second quarter of this year.
Read more: Retirement planning: A step-by-step guide
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The new IRA millionaires
The average age of the IRA-created millionaire is 68, compared to 59 for a 401(k)-created millionaire, Assaf said.
Even so, many of Fidelity’s IRA millionaires are Gen Xers reaching their peak earnings years. Some are even overtaking boomers, she added.
Gen X had a 30% increase in total IRA contributions over the past year, with their current contributions the highest they’ve been in the last five years, according to the analysis.
IRA investors can opt for a traditional IRA for the up-front tax break. Contributions to traditional IRAs are often tax deductible, but withdrawals years later in retirement are taxed at the same rates as ordinary income, like wages.
Another choice is a Roth IRA, which has no deduction today, but when you pull the funds out, the withdrawals are tax-free.
Eligibility to contribute to a Roth IRA is based on your income. For tax year 2024, the limits are between $146,000 and $161,000 for single filers and between $230,000 and $240,000 for joint filers.
For 2024, the total you can contribute to all of your traditional IRAs and Roth IRAs can’t be more than $7,000, or $8,000 if you’re age 50 or older.
If you’re self-employed, you can also put more of your income away by contributing to a Simplified Employee Pension plan, or SEP IRA. The contribution limit for a SEP IRA for 2024 is 25% of your compensation or $69,000 — whichever is less.
Most of the total balance for IRA millionaires is held in traditional IRAs, Assaf said. The reason: people converting workplace plans like 401(k)s into IRAs.
The importance of contributing
While not all account holders contribute to their IRA on an annual basis, the number of Fidelity IRA accounts with a contribution increased by 31% between the second quarter of 2023 and the second quarter of this year.
Regular contributions matter because you are steadily adding funds to your accounts regardless of whether the market is soaring or sliding. That has a cumulative impact critical to building wealth.
The average savings tenure of Fidelity account millionaires is more than two decades. What that says is that it pays to press on and invest steadily over the long term.
“The key to saving for retirement is playing the long game and maintaining consistent contributions over time,” Michael Shamrell, vice president of thought leadership for Fidelity Workplace Investing, previously told Yahoo Finance. “The majority of these savers aren’t necessarily doing anything special other than saving at a high rate in the same plan over a long period of time.”
Across generations, Roth IRAs are the retail retirement savings vehicle of choice, with 65% of all new IRA contributions going to Roth. Roth IRAs among Gen Z investors — those born between 1997 and 2012 — increased 66% in the last year.
“What we observe is that IRA-created millionaires represent a combination of workplace savings (rollovers) or transfer of assets (think moving an IRA from another provider), as well as people simply continuing to contribute and making sure they are investing so their money grows,” Assaf added.
I second that emotion. Ultimately, it’s up to you to invest in your future and to get serious about doing so.
Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist, and the author of 14 books, including “In Control at 50+: How to Succeed in The New World of Work” and “Never Too Old To Get Rich.” Follow her on X @kerryhannon.
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