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Millennials are racking up retirement savings in Roth IRAs

The amount of money millennials contributed to IRAs increased 46 percent in late 2019, compared with the amount set aside in the fourth quarter of  2018.
The amount of money millennials contributed to IRAs increased 46 percent in late 2019, compared with the amount set aside in the fourth quarter of 2018. (N/A/Getty Images)
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Some savers have done what seems impossible.

They’ve managed to save $1 million or more in their workplace retirement accounts. I’ve written before about this trend and will continue to do so to encourage those of you who think you can’t save — but could if you made it a priority.

The number of people with more than $1 million in their 401(k) hit a record 233,000 at the end of 2019, up from 133,800 for the same period a year earlier, according to Fidelity Investments, one of the country’s largest administrators of workplace retirement accounts. The number of IRA millionaires increased to 208,000, also a record high.

Debt vs retirement: How to choose where to put your money

There was also a record-setting jump in the number of million-dollar accounts in the Thrift Savings Plan (TSP), the federal government’s version of a 401(k). As of Dec. 31, there were 49,620 TSP millionaires, a 131 percent increase over the 21,432 reported at the end of 2018, according to the Federal Retirement Thrift Investment Board.

Average 401(k), IRA and 403(b) balances increased to record levels as well. The average 401(k) balance rose to $112,300, up from $95,600 in 2018. The average IRA rose 17 percent to $115,400. The average 403(b) — which is typically used by teachers, health care workers and employees of nonprofit organizations — was up 18 percent to $93,100.

It turns out that many young adults, who are often unfairly stereotyped and criticized for their avocado-toast cravings and spendthrift ways, are saving for retirement.

Millennials, also known as Gen Y, contributed $373 million to IRAs in the fourth quarter, a 46 percent increase over the total amount contributed for the same period in 2018. The average balance for millennials is $32,700, up from $29,400 last quarter and $24,200 a year ago. Going back to Q4 2009, the average balance for millennials was $7,300.

Millennials are overwhelmingly putting their money into Roth IRAs, according to Fidelity. A Roth account is funded with after-tax dollars, making future withdrawals tax-free. There are income limits for a Roth IRA, making it more likely that younger workers are eligible to contribute. There is also a hybrid Roth 401(k) increasingly being made available in employer plans. You still fund it with after-tax dollars, but you can contribute more than the current $6,000 annual limit for a traditional Roth IRA. The annual contribution limit for a Roth 401(k) is the same as for a 401(k), which in 2020 is $19,500.

For younger investors, a Roth account makes sense because they’re likely to be in a relatively lower tax bracket and the tax-free growth with years of compounding can far outweigh the benefit of current-year tax deductions for contributions to a traditional 401(k).

The number of 401(k) millionaires is rising — but there’s a catch. Some baby boomers are taking big risks.

I always find it helpful to see what others are doing, including employers. Here are some other fourth-quarter findings from the Fidelity report:

How much are people contributing to their retirement plan? The average employee savings rate reached a record 8.9 percent. Fidelity recommends that people save 15 percent of their income for retirement. But you can achieve this target with the help of a matching contribution from your employer. When factoring in the company match, the total average savings rate was 13.5 percent.

How much is your employer matching? The average employer match was 4.6 percent, yielding a total of $4,090 in 2019, according to Fidelity spokesman Michael Shamrell. “In terms of match formula, the most popular for our 401(k) clients is 100 percent match up to the first 3 percent of employee contributions, then 50 percent match for the next 2 percent of employee contributions,” Shamrell said. Make sure you’re not leaving money on the table, he advised.

Are people increasing their contribution percentage? If you want to become a 401(k) millionaire, do what they do — or get as close as you can to emulating their saving habits. Most of the millionaires put in the recommended 15 percent. Many may start out slow but eventually increase their contribution level year over year. During 2019, 33 percent of plan participants increased the amount they were saving, with the average increase just over 3 percent, Fidelity said.

How can employers help workers contribute more? Many companies (35 percent) are automatically enrolling new employees in workplace plans. And of the workers who bumped up their contributions, 60 percent had their rate automatically increased by their employers.

Under the new Secure Act, employers can automatically increase employee contributions up to 15 percent of their pay. Workers can of course opt out of the increases.

Fidelity’s overview of retirement savings trends gives us a window into how others are investing for retirement. The data shows people pushing themselves. I have a question for you: Might you be able to up your game?

Have a question about retirement or personal finance? Join Michelle for an online Q&A every Thursday at noon Eastern time. Readers may write to Michelle Singletary at The Washington Post, 1301 K St. NW, Washington, D.C. 20071 or To read previous Color of Money columns, go to