Retirement Millionaire Update
More and more retirement savers are entering the millionaire club due to the recent bull market. However, the first quarter of 2022 has been challenging for retirement savers. Depending on the Index, the market correction or bear market has erased much wealth. Moreover, Fidelity’s retirement update shows the number of millionaires has declined.
The update is one of the more interesting sets of data published each quarter and gives a clear picture of the status of retirement.
Average Retirement Account Balances
In the most recent retirement millionaire update, the average Individual Retirement Account (IRA) balances declined to $127,100 in the first quarter. In addition, balances decreased (-2%) in comparable periods from the prior year and (-6%) in sequential quarters.
The average 401(k) account balances declined to$121,700 in the first quarter. In addition, workers’ balances declined (-2%) in comparable periods in Q1 2021 and (-7%) in sequential quarters.
Similarly, the average 403(b) account balances fell (-7%) to $107,600 and decreased (-6%) in sequential quarters.
However, compared to a decade ago, almost all investors are up illustrating the power of compounding.
Savings and Time in a Retirement Account Matters
Two factors are the primary contributors to attaining a high retirement balance: dollar amount saved and time. Most intelligent investors known for compounding to work time matters the most. A retirement portfolio can reach six or seven figures after 30 years if you start early enough.
According to Fidelity’s data, the savings rate is nearly 14%, combining employer and employee contributions. This percentage is a significant number. For example, a worker that is earning $50k is contributing $7k per year. The table below breaks out the dollar retirement contribution based on salary, assuming a 14% savings rate.
|Salary ($)||Savings Amount ($)|
Employees and employers have seemingly learned that saving a relatively high amount is crucial to retiring early or on time.
The second important factor is time. For employees in their company plan for 5-years, the average balance is $257,400, up from $115,000 in 2017. Suppose a person has been in a 401(k) plan for 10-years; the average balance is $383,100, up from $85,100 in 2012. Lastly, the average balance has grown to $482,900 from $64,900 in 2007.
A future retiree benefits significantly from time in a plan.
Final Thoughts on Retirement Millionaire Update
A goal for many employees is to achieve the $1 million mark in their retirement accounts. Suppose you reach this dollar value by age 62, it is possible to sustainably withdraw 4% of your balance for $40,000 per year following the Trinity study. According to simulations, retirees will probably have a 100% success rate for 20 years or 30 years. How do you get to the $1 million retirement account? Many people prefer using index funds to create a lazy portfolio. Below are several strategies to follow.
- Bogleheads 3 Fund Portfolio
- Coffeehouse Portfolio
- Permanent Portfolio
- Warren Buffett’s Two-Fund Portfolio
- Core and Satellite Portfolio
- Factor Investing
However, the maximum Social Security benefit is $2,364 per month or $28,368 per year. Retirees need to ask themselves if $68,368 per year is enough to retire on or not. It could be, especially if the mortgage is paid early and there is no other debt. Next, adding a passive income stream from the dividend growth investing strategy and retirees may be fine.
Sure Dividend analyzes 850+ income securities every quarter in the Sure Analysis Research Database using the same metrics that matter in order to find the best income securities for members.
This is real research, not a quick computer screen. And all of this analysis is what powers the Sure Dividend Pro Plan. The Dividend Pro Plan includes:
- The Sure Dividend Newsletter focuses on investing in high-quality dividend growth stocks with a focus on expected total returns. It is Sure Dividend’s flagship newsletter. It always publishes on the first Sunday of the month.
- The Sure Retirement Newsletter focuses on investing in high yielding stocks, REITs, and MLPs. All recommendations must have a dividend yield of at least 4%. It always publishes on the second Sunday of the month.
- The Sure Passive Income Newsletter focuses on investing in high-quality dividend growth stocks with a buy and hold forever approach. It always publishes on the third Sunday of the month.
Dividend Power readers can use my Sure Dividend coupon code DP100 for $100 off the Dividend Pro Plan, reducing your price from $499/year to just $399/year.
Click here to start your 7-day free trial with the discount applied.
The Stock of the Week
Today we highlight Medtronic (MDT), one of the largest medical device companies in the world. Medtronic missed estimates for Q1 2022, reporting disappointing revenue and earnings per share results because of supply chain disruptions and COVID-related lockdown in China. The share price dropped, and according to Stock Rover*, the stock price was down nearly (-20.8%) in the trailing 1-year. Medtronic is a Dividend Aristocrat with 45 years of dividend increases. The forward dividend yield is about 2.54%, the highest since the worst months of 2020. The payout ratio is relatively conservative at about 56%. The stock price is below the 50-day and 200-day exponential moving average (EMA). The forward P/E ratio is about 17.7X, near the lower end of the 10-year range. Furthermore, the company is valued lower than most of its competitors.
Dividend Increases and Reinstatements
Search for a stock in the list of dividend increases and reinstatements. This list is updated weekly. In addition, you can search for your stocks by company name, ticker, and date.
Dividend Cuts and Suspensions List
The dividend cuts and suspensions list was most recently updated at the end of May 2022. As a result, the number of companies on the list has risen to 557. Thus, well over 10% of companies that pay dividends have cut or suspended them since the start of the COVID-19 pandemic. The list is updated monthly.
Six new additions indicate companies are experiencing solid profits and cash flow in May.
The new additions were CVR Partners, LP (UAN), Oasis Petroleum (OAS), Eagle Bulk Shipping (EGLE), United Guardian (UG), Golden Ocean (GOGL), and Ellington Residential Mortgage REIT (EARN).
Dow Jones Industrial Averages (DJIA): 33,214 (+6.24%)
NASDAQ: 12,131 (+6.84%)
S&P 500: 4,158 (+6.59%)
The S&P 500 is trading at a price-to-earnings ratio of 21.02X, and the Schiller P/E Ratio is about 32.52X. These multiples are based on trailing twelve months (TTM) earnings.
Note that the long-term means of these two ratios are 16.0X and 16.9X, respectively.
The market is still overvalued despite the recent market correction and rebound. Earnings multiples more than 30X are overvalued based on historical data.
S&P 500 PE Ratio History
Shiller PE Ratio History
Stock Market Volatility – CBOE VIX
This past week, the CBOE VIX measuring volatility was down about 4.5 points to 25.72. The long-term average is approximately 19 to 20. The CBOE VIX measures the stock market’s expectation of volatility based on S&P 500 index options. It is commonly referred to as the fear index.
The two yield curves shown here are the 10-year US Treasury Bond minus the 3-month US Treasury Bill from the NY York Fed and the 10-year US Treasury Bond minus the 2-year US Treasury Bond from the St. Louis Fed.
Inversion of the yield curve has been increasingly viewed as a leading indicator of recessions about two to six quarters ahead, according to the NY Fed. The higher the spread between the two interest rates, the higher the probability of a recession.
The US Census Bureau reported that sales of newly built homes fell 16.6% in April from a downwardly revised March rate of 799,000. The April seasonally adjusted annual rate of 591,000 is down 26.9% from a year earlier and represents the fourth straight monthly decline. New home sales decreased in all regions; Northeast (-5.9%), Midwest (-15.1%), South (-19.8%), and West (-13.8%). The average sale price for a new home in April was $570,300, while the median price was $450,600, a 19.6% increase from a year ago. The supply of new homes for sale increased to a 9-month supply in April, compared to 6.9 months in March and 4.7 months a year earlier.
The US Census Bureau reported that new orders for manufactured durable goods increased 0.4% to a seasonally adjusted $265.3 billion in April. The increase followed a downwardly revised 0.6% increase in March, reported initially as a +1.1% reading. Transportation equipment was a primary contributor to the rise, up 0.6% to 86.7B. In addition, new orders for manufactured durable goods grew 10.5% on a year-over-year basis.
The second estimate of GDP for 2022 Q1 reported a 1.5% decrease and followed an initial estimate of a 1.4% drop. Q4 2021 reported a 6.9% increase. The trade deficit was a primary contributor, reducing the GDP by 3.2 percentage points. Imports climbed 18.3% while exports fell by 5.4%. Both private inventory and residential investment were downwardly revised. Government spending across state, federal, and local governments declined 2.7%. An 8.5% reduction in defense spending was a primary contributor. Business spending on equipment was 13.2%, lower than the 15.3% first estimate. As gauged by personal consumption expenditures, consumer spending grew 3.1%, better than the first estimate of 2.7%.
Thanks for reading 401(k) Millionaire Update – Week in Review!
Here are my recommendations:
If you are unsure how to invest in dividend stocks or are just getting started with dividend investing. Please look at my Review of the Simply Investing Report. I also provide a review of the Simply Investing Course. Note that I am an affiliate of Simply Investing.
If you are interested in an excellent resource for DIY dividend growth investors. I suggest reading my Review of The Sure Dividend Newsletter. Note that I am an affiliate of Sure Dividend.
If you want a leading investment research and portfolio management platform with all the fundamental metrics, screens, and analysis tools you need. Read my Review of Stock Rover. Note that I am an affiliate of Stock Rover.
If you would like notifications about when my new articles are published, please sign up for my free weekly e-mail. You will receive a free spreadsheet of the Dividend Kings! You will also join thousands of other readers each month!
*This post contains affiliate links meaning that I earn a commission for any purchases that you make at the Affiliates website through these links. This will not incur additional costs for you. Please read my disclosure for more information.
Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.