Just 60 million Americans participated in 401(k) retirement plans last year, according to The Investment Company Institute—but most funds saw a boost, the Associated Press reported.

Fidelity Investments reviewed 19.8 million 401(k) plan accounts and found the average plan rose 24 percent to $129,300, a new record, in the second quarter compared to a year ago. The median balance jumped 22 percent from the previous year to $29,000.

“In 401(k) accounts especially, 85 percent of the balances that increased in (the second quarter) were due to market performance,” explained Jessica Macdonald, Fidelity’s vice president of thought leadership.

Adding to the growth in funds was the contributions of employees that rose to a record high in the second quarter. The average employee put 9.3 percent of their earnings into their 401(k) account during that time frame, according to Fidelity.

“The best thing you can do is keep your money in your account and let it grow and plan to tap into it for your actual retirement,” Macdonald said.

For more reporting from the Associated Press, see below.

Wall Street Sign in New York City

Solid stock market gains through much of the pandemic and workers putting more of their pay toward their golden years are paying off for many retirement savers.

The 60 million Americans who participated in 401(k) plans last year included former employees and retirees.

Retirement plans also got a boost as contributions by employees, including more than half of Gen-Z workers, increased to an all-time high in the second quarter. Also, fewer savers borrowed from their retirement accounts, keeping more of their money invested in the market as it rallied.

Still, most of the credit for juicing retirement plan balances goes to the resilient stock market, said Macdonald.

The S&P 500, a benchmark for many stock funds, plunged more than 20 percent in February and March last year as the pandemic knocked the economy into a recession, but recovered fully a few months later and continued to climb to new highs this year. The index ended the second quarter up 39 percent from a year earlier, buoyed by an improving job market and optimism that vaccinations would pave the way for more of the economy to reopen.

Workers’ better savings habits have also been a factor in building their nest egg. About 38 percent of employees with Fidelity managed 401(k) plans increased how much they paid into their retirement account over the last year, while only 7 percent reduced their contributions.

Some 18.2 percent of baby boomers with a 401(k) made a “catch-up” contribution in the second quarter, a new high. This refers to the up to $6,500 that savers age 50 or older are allowed to contribute in a given year above the maximum annual contribution of $19,500. Such contributions have been increasing slightly over the past few years, Fidelity said.

Younger workers are also putting more of their pay into retirement plans. Among Gen-Z employees, the oldest of which are now in their early 20s, some 54 percent increased their 401(k) contributions over the last year, while 43 percent of millennials did, the company said.

Most employers give workers the option to automatically increase their contributions each year, without having to do anything. Some automatically sign up their employees for auto-escalation programs, requiring them to opt out if they don’t want their contribution levels to steadily rise.

Fewer investors have been borrowing from their retirement savings, or are at least paying loans off more quickly. About 17.5 percent of 401(k) plans reviewed by Fidelity had an outstanding loan in the second quarter, a record low.

Financial experts discourage investors from borrowing from their retirement accounts, because doing so takes money out of the market, potentially missing out on gains.

For most savers, building a nest egg is a marathon, not a sprint, as reflected by far higher average retirement plan balances among those who’ve been setting aside part of their income for a decade or more.

Investors who had been pumping money into their Fidelity 401(k) plans for at least 10 years averaged a balance of $402,700 in the second quarter, the company said. In contrast, plans held by Gen-Z savers had an average balance of $4,700.

The size of nest eggs also varies widely, depending on whether you’re a man or a woman. Among women invested for 10 years in a 401(k) plan, the average balance was $324,700 in the second quarter, while the average balance for men was $440,300, Fidelity said.

Among the likely factors behind the disparity: the wage gap between men and women. In 2020, women’s annual earnings were 82.3 percent of men’s, according to the Bureau of Labor Statistics.

Because 401(k) plans are funded by income and often bolstered by matching funds from employers, earning less pay could make it harder to set aside a bigger slice of income toward retirement.

The average employer contribution to 401(k) plans was 4.6 percent in the second quarter, Fidelity said. The figure has hovered between 4.4 percent and 4.7 percent over the last four years.

About 52 percent of private U.S. workers had access to an employer provided defined contribution plan, such as a 401(k), as of March 2020, according to the Bureau of Labor Statistics.

This content was originally published here.

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