The average balance in 401(k) accounts stands at $127,100, which remains below the peak levels seen in 2021. However, Fidelity reports that there are now 500,000 Americans with 401(k) balances exceeding $1 million.
Significance: This trend highlights the disproportionate advantages that wealthier individuals gain from tax incentives related to retirement savings. Context: A significant number of Americans do not have full-time employment with companies that provide 401(k) plans or similar retirement options. Among those who do have access, many are unable to contribute the maximum allowable amount, which is $23,000 this year. Even fewer manage to consistently maximize their contributions over decades without tapping into their retirement funds for everyday expenses. Additionally, a limited number possess the risk tolerance required to invest their entire retirement savings in the stock market, as opposed to a more conventional mix of stocks and bonds. Conclusion: The individuals who successfully build seven-figure balances in their 401(k) accounts are typically those who are affluent enough to forgo tax incentives for retirement savings. Nevertheless, they are the ones who ultimately reap the greatest benefits from these incentives.
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