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Americans, break out the Champagne: Your retirement savings just reached an all-time high.
The average 401(k) account balance reached $97,700 in the 12-month period that ended June 30, while the average Individual Retirement Account (IRA) hit a whopping $100,200. A year ago, both balances hovered just above $89,000.
These latest figures, from Fidelity, beg the question: Why have our retirement accounts been getting fatter? For one, contributions are on the rise. Employees contributed a record high of $5,850 to their 401(k) accounts, up 4% over last year. But most of the growth came thanks to the stock market, which accounted for 72% of the uptick, reported Bloomberg. (And with the Dow Jones industrial average surpassing a record-breaking 22,000 yesterday, more boosts could come.)
There are still things we could all be doing better though, including:
Taking full advantage of our 401(k) matches. According to Fidelity, more than one in five employees don't maximize their company's match. Even more disappointing is that 53% were only 1 or 2 percentage points away from qualifying for the full matching amount — which means just a tiny bump on their end could have yielded thousands more in free contributions.
Watching our asset allocations. Of course, everyone has different goals and timelines for their retirement money, and different appetites for risk. But generally speaking, the closer you are to retirement, the less risk you probably want to take. Fidelity, however, found that because of the run-up in stocks, the equities portion of some older Americans' portfolios also went up during a time when they likely would want to dial back on risk. By checking in on your account at least once a year, you can make sure that you're still comfortable with your asset allocation and can rebalance, if necessary.
Starting earlier. While it's great that Americans on the whole are doing well with their nest eggs, it's the long-term savers that we should really hold up as retirement rock stars: Fidelity found that people who've had their 401(k) accounts for 10 straight years had an average balance of $266,100 — more than two and a half times what the average person had.
No investment strategy can guarantee a profit or protect against loss. All investing carries some risk, including loss of principal invested.