Comparing your savings to those of your peers may help keep you on the right track to securing a worry-free retirement, and thanks to number crunching by Fidelity Investments, we now know that the average American's balance in retirement accounts is roughly $100,000.

Digging into the numbers

Fidelity Investments is one of the nation's biggest investment companies. It's home to 15.1 million 401(k) accounts and 8.8 million IRA accounts. Its perch provides an excellent view of the progress Americans are making in saving money for retirement, and based on its latest figures, there's reason for optimism.

A burlap sack with a big dollar sign on it overflowing with money.


According to their analysis, the average 401(k) plan participant has successfully salted away $97,700 as of June 30. Meanwhile, the average balance of an IRA stands at $100,200. In both cases, these amounts are nicely higher than their levels last year. The average 401(k) and IRA balance has grown 9.6% and 11.8% over the past 12 months, respectively.

 Account Q2 2017 Q2 2016 Q2 2012
401(k) $97,700 $89,100 $73,000
IRA $100,200 $89,600 $73,300

Data source: Fidelity Investments.

What's driving balances higher?

The majority of the growth in average account balances is due to a stock market that's marched significantly higher. However, accounts are also going up because people are steadily increasing their contributions.

In the 12 months through June 30, the S&P 500 returned 17.9%, and as a result, the stock market's rally accounts for 72% of the increase in account balances. Meanwhile, employees contributed an average of $5,850 to their 401(k), up 4% from this time last year.

^SPX Chart

^SPX data by YCharts.

The increase in contributions could be due in part to employers increasingly including auto escalation features in their retirement plans. Auto escalation allows workers to set and forget increasing how much of their salary they set aside in their 401(k) plan, and it's a great way to give retirement savings a booster shot. 

Typically, workers are enrolled in plans at a contribution rate of 3% that's unlikely to provide a sizable retirement nest egg. Increasing the contribution rate, however, can be challenging for many workers who are trying to balance their budgets, and as a result, too many workers leave their rate untouched. By automating the process, second-guessing that could otherwise keep someone from contributing more to their account can be eliminated, and if the increase is set at a reasonable 1% annually, the impact on a person's monthly budget is modest.

Balances may also be benefiting from more workers taking advantage of catch-up contributions. Workers age 50 and up can contribute an additional $1,000 per year to either a traditional or Roth IRA and an additional $6,000 per year to a 401(k) plan. In 2017, someone age 50 or older can set aside $6,500 in an IRA and $24,000 in a 401(k) plan.

Account balances have also increased because of wage growth. According to the latest Bureau of Labor Statistics' average hourly and weekly earnings report, the typical private worker earned $26.36 per hour in July, up from $25.71 on year ago.

Looking ahead

Stock market tailwinds aren't likely to prop up account balances forever, but long-term investors have historically been rewarded for staying the course with their investments and avoiding market timing. If history is any indicator, stock markets will retreat at some point, but when they do, it should be viewed as an opportunity to increase contributions to retirement accounts, not decrease them. While there's no telling what average retirement balances will look like next month, next quarter, or next year, steadily increasing investments to retirement accounts have been the biggest driver of their growth over time.