401(k) Savers Set New Records — Here’s How to Catch Up
Retirement savers hit record 401(k) contributions. Learn how to catch up with smart strategies.
POLICY WIRE — City, Country — Retirement savers are hitting new milestones as 401(k) contributions remain at historic levels, according to a recent analysis by Fidelity.
The average worker contributed 14.4 percent of their income to 401(k) accounts during the second quarter, with employees contributing 9.6 percent and employers adding 4.8 percent, the firm reported.
Despite market volatility earlier this year, individuals maintained focus on long-term financial goals, Fidelity noted. Account balances surged from $141,000 in March to $155,800 by June, marking the largest quarterly growth since 2020.
However, not all workers are meeting these benchmarks, especially those facing financial strain due to the current affordability crisis. Financial planners suggest assessing retirement goals based on age and income to determine appropriate contribution rates, said Nick Avila, founder of United Debt Relief.
Experts say catching up on 401(k) savings is more achievable than many believe. One strategy involves increasing contributions by 1 percent each time an employee receives a raise. For example, if someone earns a 3 percent contribution rate and gets a raise, they can adjust their contribution to 4 percent through their account dashboard.
📄 POLICY WIRE WHITEPAPER PUBLISHED: PAKISTAN’S NATIONAL SECURITY POLICY PRIORITIES
Fidelity highlighted that younger workers benefit significantly from small increases. A 35-year-old earning $60,000 who adds 1 percent to their contributions could gain nearly $110,000 by age 67, requiring just under $12 extra per week.
A key advantage of 401(k) plans is employer matching, which typically offers 50 cents for every dollar contributed up to 6 percent of the employee’s salary. This “free money” is often overlooked, as it becomes fully owned only after a vesting period, such as three years of employment.
Avila recommends prioritizing high-interest debt before increasing 401(k) contributions. Clearing credit card debt, which averages $1,100 in annual interest for a $5,000 balance, can free up funds for retirement savings.
The IRS allows maximum annual contributions of $24,500 for 2026, with additional catch-up limits for those aged 50-63. Those aged 50-59 can contribute an extra $8,000, while those 60-63 may add up to $11,250. These limits are expected to rise annually to keep pace with inflation.
Reporting by Policy-Wire (PW)
