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Record High Retirement Savings
Americans are putting the pedal to the metal when it comes to their 401(k)s
Happy Sunday everyone, and welcome to Benzinga’s financial advisor newsletter.
In today’s newsletter, we are covering a recent study by Fidelity that unveiled various positive trends in retirement planning, including impressive growth in 401(k) accounts and a rise in Roth IRA participation in Gen Z.
So, let’s get into the Industry Chatter!
Lastly, if you would like to be featured in our upcoming advisor spotlight editions, click here to send us an email.
INDUSTRY CHATTER
A recent Fidelity study shows that Americans are putting the pedal to the metal when it comes to their 401(k)s.
The financial firm puts out quarterly reports on its retirement accounts. In a first-quarter analysis, 401(k) contribution rates were just above 14%.
Fidelity says the 14% is a mix of employer and employee savings, with 9.4% coming from employees and 4.8% from employers.
Powering Higher
The same Fidelity report lays out the average size of 401(k)s, 403(b)s, and IRAs.
There was growth across the board in all three vehicles, with the average 401(k) size growing by 6% to $125,900.
IRAs jumped by 10% to hit an average size of $127,745, and 403(b)s rose by 7% to $113,000.
Generation Z Loves Roths
Roth IRA participation is blossoming with Gen Z.
The number of Roth IRAs in the demographic increased by 71% in the first quarter of 2024 compared to an 11.1% increase in the first quarter of 2023.
The average contribution size moved up too, with Gen Z boosting their Roth savings by roughly 11%.
According to Fidelity, the number of Gen Z women with IRAs grew by 60% in the last twelve months.
Who Wants to Be a Millionaire
Another finding from the report included the observation that the number of 401(k) millionaires is growing.
The millionaire 401(k) club jumped by a whopping 43% over the last year.
Fidelity credits market gains and boosted savings rates as reasons behind accounts pushing into the land of seven digits.
For those wondering how long it takes to reach 401(k) millionaire status, Fidelity says the average 401(k) millionaire has been participating for an average of 26 years.
Not All Sunshine and Rainbows
The study from Fidelity is full of positives, but there is one negative when flipping through the numbers.
The amount of individuals with outstanding loans from their 401(k) is just under 18%, higher than the 16.7% measure from twelve months earlier.
Fidelity made a point in the report to highlight the biggest winners in the retirement savings realm: individuals who consistently participate.
The firm says consistent participants have savings far exceeding those who start and stop their 401(k) contributions. Consistency is key with retirement savings.
WHAT THE PROS ARE WATCHING
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MARKET RECAP
The U.S. stock market ended a five-week positive streak as investors feared that slowing economic momentum could impact the earnings outlook for American corporations.
The U.S. economy grew at an annualized rate of 1.3% in the first quarter, marking a downward revision from the previous estimate of 1.6%.
The Fed's preferred inflation measure remained steady in April, easing some worries about resuming price pressures. Yet, slowing spending and income growth also signaled weakening consumer health, while the Chicago business activity gauge plummeted to its lowest level since May 2020, raising concerns about a potential end-cycle slowdown.
The tech sector, as tracked by the Technology Select Sector SPDR Fund, was the worst performer of the week, while utilities, tracked by the Utilities Select Sector SPDR Fund, outperformed as investors shifted their focus to defensive sectors.
Trump Stock Drops
Trump Media & Technology Group Corp’s stock fell after former President Donald Trump was found guilty of 34 charges related to falsified business records. Despite strong support from some investors, concerns over the company’s financial performance and the decline in user engagement on Truth Social have impacted investor sentiment.
Nvidia Valuation Soars
Nvidia Corp. saw its market capitalization surge to $2.805 trillion, surpassing the combined value of Tesla Inc., Exxon Mobil Corp., Walmart Inc., Costco Wholesale Corp., Netflix Inc., Intel Corp., Walt Disney, and PepsiCo Inc. The company’s stock hit new all-time highs due to increased investor confidence, partly driven by Nvidia’s advancements in AI technology and the potential use of its products in Elon Musk’s supercomputing projects.
Record Home Prices
U.S. home prices reached all-time highs in March 2024, with a 7.4% year-on-year increase, marking the fastest growth rate in over a year. San Diego led with an 11.1% annual gain, followed by New York and Cleveland.
Stocks Outperforming Nvidia
Nvidia’s stock surged 186% over the last year, driven by AI chip demand. Seven other U.S. stocks, including Vera Therapeutics Inc. and MoneyLion Inc. ML, more than doubled Nvidia's returns. These companies benefited from advancements in biotech, fintech and retail, showcasing diversified industry growth.
Biden’s Ceasefire Plan
President Joe Biden proposed a comprehensive ceasefire deal between Israel and Hamas on Friday, emphasizing a roadmap for enduring peace and the release of hostages. The plan includes a ceasefire, prisoner exchanges, and Gaza’s reconstruction with international cooperation.
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THE WEEK AHEAD
Economic Data
Monday: S&P flash U.S. manufacturing PMI, Construction spending, ISM manufacturing
Tuesday: Factory orders, Job openings
Wednesday: ADP employment, ISM services, U.S. productivity (final revision)
Thursday: Initial jobless claims
Friday: Consumer credit, U.S. employment report, U.S. hourly wages
Earnings
Monday: Bank of America, JPMorgan Chase & Co, AstraZeneca
Tuesday: Allianz, Deutsche Telekom, Siemens
Wednesday: American Airlines, Advanced Micro Devices, Allstate, Airbnb
Thursday: Adidas, Lululemon, Infineon, Roche Holding
Friday: Alphabet, Spirit Airlines, Diamondback Energy
Click here for the full calendar of economic data and earnings reports.
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