The stock market stripped them of their 401(k) millionaire status

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For a growing number of employees, it’s like getting titanium in a loyalty program. They join an elite group of workers whose workplace retirement plans exceed $1 million.

This 401(k) millionaires According to Fidelity Investments, one of the largest workplace program managers, the fourth quarter of 2021 saw a 32% increase compared to the same period last year.

but high inflation caused consumer price spikes, while ukraine war and supply chain Problems have rattled the stock market. The resulting economic chaos has driven thousands of 401(k) participants out of the millionaires club.

The federal government’s 401(k) Thrift Savings Plan (TSP) retirement plan also saw a drop in the number of millionaires.

Mobile, cryptocurrency. A record number of workers have become millionaires with boring 401(k)s and IRAs.

in its most recent quarter retirement analysisFidelity reported that its 401(k) millionaire population fell 8% to 406,000 in the first quarter of 2022 from 442,000 in the previous quarter. The drop ended a record increase in the number of newly born millionaires.

The number of individual retirement account (IRA) millionaires also fell by nearly 8%, Fidelity reported. The number of TSP millionaires fell 11% from the previous quarter to 100,360 as of March 31, according to the Federal Retirement Thrift Investment Board.

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Market volatility naturally has an impact on account balances, but getting out of the millionaires club can be psychologically harder. This is a milestone that can show you have enough money to retire comfortably. It’s a rare world when you consider that so many Americans don’t even have access to a retirement plan in the workplace.

Average retirement account balances fell in the first quarter of this year. Average 401(k) balances fell to $121,700 in the first quarter, down 7% from the fourth quarter of 2021 and down 2% from a year ago.

The number of 401(k) millionaires in Fidelity-managed plans is relatively small at just 2% of 20.7 million accounts, but the ability to grow wealth in a workplace plan shows you don’t have to chase risky cryptocurrency investments Chance.

The volatility of the stock market in late 2018 caused the number of 401(k) millionaires to drop by nearly 29%. Still, this elite group continues to save money in boring mutual funds. They have a history of staying calm when the stock market is chaotic. This is how they broke the millionaire mark in the first place.

If you’re a young investor, you can learn a lot from the investing behavior of 401(k) and TSP millionaires. Mike Shamrell, vice president of thought leadership at Fidelity, said they continued to invest despite the stock market volatility. The average 401(k) millionaire has been investing for 26 years.

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“These people have seen a lot,” Shamrell said. “They’ve seen a lot of different market conditions. They’ve seen a lot of different economic swings. So I think they’re a good team and they definitely understand the value of staying the course and taking the long view. Because they’ve been involved for a long time. game, they understand that shifts are a normal part of the economic landscape.”

Some do flee to safer investments. In the first quarter of this year, more than 5% of 401(k) savers made more conservative investments in their 401(k) accounts, Fidelity found. That low percentage, however, suggests that the vast majority of workplace retirement investors aren’t spooked by the stock market downturn, at least not yet.

Fidelity’s quarterly retirement analysis also showed that while average account balances fell due to the underperformance of the stock market, the 401(k) savings rate hit a record.

The total savings rate reached 14% in the first quarter, slightly below Fidelity’s recommended savings rate of 15%. Those who achieve millionaire status typically have a 15% savings rate, which includes the money they put into the account and a corresponding contribution from their employer.

Earlier this year, my husband and I pushed our oldest daughter to invest 15% of her salary in a 401(k) plan offered by her company. Before long, the stock market began to plummet. Since she started investing, her balance has been falling.

“Where did my money go?” She rolled her eyes and kept asking after reading the financial news reports on the stock market. Give it time, we tell her.

To the Class of 2022: This is a great job market. you have this.

For individuals who have been in a 401(k) plan for the past 15 years, Fidelity says the average account balance has grown to $482,900 from $64,900 in the first quarter of 2007, which was on the cusp of the Great Recession. When volatility occurs, investing for the long term is one of the best things we try to overcome,” Shamrell said.

Did you quit the 401(k) millionaire club? Did you change your investment strategy because you lost your 401(k) millionaire status? Send your comments to colorofmoney@washpost.com. Please include your name, city and state. Enter “Millionaires Club” in the subject line.