Workers Contributing More to, Borrowing Less from 401(k)s

So says Fidelity, which looked at how 14.5 million savers are behaving in retirement plans that it administers. The combination means that the average 401(k) balance was $92,500 at the end of 2016, up nearly 5 percent from a year earlier.

"Fewer people have pension plans now, and they're more reliant on a 401(k), so I think people realize the importance of savings," says Jeanne Thompson, senior vice president at Fidelity.

Paychecks finally seem to be on the upswing for families outside the top earners, and the median household income climbed 5 percent in 2015 to $56,516. That, plus the strengthening job market, had workers feeling confident enough to set aside 8.4 percent of their paychecks during the last three months of 2016. It's the highest quarterly level for 401(k) contributions since the spring of 2008, just before the worst of the financial crisis.

Employers are also playing a role. About one in four workers last year raised their contribution rate for their 401(k) accounts, and only half of them did so on their own. The other half of the increases were part of automatic programs set up by employers.

"Many employers are starting to realize, as they freeze their pension plans, they do want to set people up for success," Thompson says. That has employers not only automatically enrolling their workers into the 401(k) plan but also discouraging loans from them.

Only 21 percent of workers have a loan outstanding from their 401(k) accounts, the lowest level in seven years.

Having the option to take out a 401(k) loan has some benefits. Employees are more likely to participate in plans that allow them and may even contribute more than they would have otherwise, researchers say.

Taking a loan can be a risky move. Most loans get repaid, but defaults do occur when workers leave their jobs. Loans from 401(k) accounts can become due immediately when workers retire, get laid off or quit.

Not only that, taking out a 401(k) loan pushes many workers to cut back on their contributions, and many don't get back to their prior levels of savings until after they've repaid the loan. Workers miss out on the returns the forgone contributions, and the cash that was borrowed, would have made had it been invested in the stock market.

Of course, the encouraging numbers from Fidelity cover only a slice of the retirement-savings landscape. Not everyone can save in a 401(k), even if they wanted to.

Roughly one out of every three workers in the private sector has no access to a 401(k) or similar retirement plan through work. Lower-income workers generally have disproportionately less access to these plans than those with higher incomes. So do workers at smaller companies.