The average balance of plan participants' 401(k)s at the end of 2014 hit a record $91,300, thanks to soaring stocks and larger contributions from workers, according to Fidelity Investments.
That's up 2 percent year over year and a whopping 30 percent over the 2011 average of $69,100, Fidelty, the largest provider of 401(k) plans, said.
The average contribution to a 401(k) was also up 4 percent to $9,670, Fidelity said.
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Not to be left out, IRAs saw an average increase of 4 percent year over year to $92,200, with average contributions up 2 percent year-over-year to $4,325.
The average savings rate was up, too, to 8.1 percent; that's the highest it's been since the end of 2011. If you add in employer contributions, it hit a hefty 12.2 percent of participant salaries for 2014.
Participants who have consistently put money in their 401(k) plan for 10 years or more are doing especially well, with an average balance of $248,000 – an increase of 11 percent over a year ago.
While that's all good news, there's also some not-so-good news from the retirement savings front:
Fund companies are growing concerned about the high proportion of equities in retirement portfolios, as participants chase returns.
Investors' exposure to stocks are the highest they've been since before the last two market crashes, Martha G. King, head of Vanguard Inc.'s advisor sales division, told Investment News.
Moreover, King called it "worrisome" that advisors are adding risk to portfolios to try to bring in higher returns in an environment that's been anything but friendly to the old standbys.
"We need to either adjust goals or to invest more. I don't hear enough advisers saying it," she told Investment News.
King isn't the only one. PIMCO and T. Rowe Price are also warning of the lack of returns in the present market. And not only are investors — and their advisors — courting disaster by sticking with equities, but they're not rebalancing, chasing returns for longer periods than are safe. And they're steering clear of bonds, and the diversification they bring, because they're not happy with the low returns bonds presently offer thanks to low interest rates.
Even low-volatility stock funds are no solution, because they're so closely correlated to the markets: if markets fall, so do those stocks, negating any potential benefit from their normal low volatility. The jury's out on that, though, because low-volatility stock funds have their defenders, who say they can help limit the damage to a portfolio in a plunging market.
Also read: 1 in 5 take loan or early 401(k) withdrawals
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