Despite the financial stresses brought on by the pandemic, many Americans’ retirement account balances have swelled—in some cases to record levels surpassing pre-COVID highs, according to a trio of new reports tracking retirement savings trends. That, in turn, is significantly expanding the ranks of 401(k) and IRA millionaires today, Fidelity Investments, the nation’s largest provider of IRAs, told Investopedia.

Key Takeaways

  • Average retirement account balances hit record levels in the first quarter of the year despite the financial impact of the pandemic, new surveys show.
  • This boost has led to a doubling of the number of people with $1 million or more in retirement savings.
  • Overall, relatively few people took hardship withdrawals or loans from their retirement accounts during the pandemic, and some increased their contributions.

Bigger Balances, More Millionaires

In a Q1 2021 analysis, Fidelity found average balances across more than 30 million IRA, 401(k), and 403(b) retirement accounts reached record levels for the second consecutive quarter.

Steady savings, tax-time contributions, and stock market gains helped lift all balances: Average 401(k) balances hit $123,900 in the first quarter, up 36% from Q1 2020, while average IRA balances reached $130,000, up 31% from the same period a year ago, the data show. The average 403(b) balance climbed to $107,300—42% higher than in Q1 2020.

Additional results shared by Fidelity count a record number of people with at least $1 million in their retirement savings kitty: 365,000 401(k) millionaires and 307,600 IRA millionaires—both all-time highs. The total number of million-dollar accounts grew 8% from last quarter and is more than double the number in Q1 2020.

401(k) Withdrawals and Loans Were Rare

A separate analysis by Bank of America, based on its 3.1 million-participant 401(k) business, also showed workers’ average 401(k) account balances increasing about 8% from 2019 to 2020.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act of March 2020, which temporarily relaxed withdrawal rules on distributions and allowed twice the ordinary loan amounts, had an impact on some savers’ retirement plan assets. But overall, relatively few people tapped their accounts.

"One of the most interesting findings from the report explored how retirement plans helped employees navigate an unprecedented year," says John Quinn, managing director and head of institutional retirement products and platforms at Bank of America. Only about 10% of its 401(k) plan participants took a CARES Act-related distribution, the average amount being $17,901. Men withdrew 50% more on average than women, and GenXers pulled out the highest amounts.

Fidelity’s report tracked slight declines in plan loans and withdrawals during this year’s first quarter. The percentage of workers with an outstanding 401(k) loan dropped to 17.5%, down from 19.7% during the first quarter last year. And the percentage of workers who made a withdrawal from their 401(k), including for hardship reasons, fell to 2.4%, down from 6.1% at the end of 2020.

Retirement Savers Remain Optimistic

Those findings are in line with the latest data from the Employee Benefit Research Institute’s (EBRI) 2021 Retirement Confidence Survey, notes Craig Copeland, EBRI senior research associate and co-author of the report. Among those who made changes to their retirement plans in the last year, for example, six in 10 said they actually boosted the amount they contribute. One in four reduced or stopped contributions.

Copeland says this measure of retirement-savings resolve shows resilience even in the face of troubled times. "Just one in 10 workers who have saved for retirement say they’ve taken a loan, hardship distribution, or early withdrawal from their workplace retirement plan in the past 12 months," he says. "The most likely reasons for taking this money out were for paying off credit card debt or for a COVID-related need."

Despite the uncertainties of the last year, 72% of workers remain optimistic, voicing confidence in their ability to retire comfortably—up 3 percentage points from 2020. EBRI’s 31st annual survey, which polled 3,017 workers and retirees earlier this year, is the longest-running study of its kind.