Amid the pandemic, some people can't afford rent, others became 401(k) and TSP millionaires.  retirement plan label on document folder | Millions lost their jobs because of the pandemic. Tens of millions of Americans needed federal stimulus payments to put food on the table. Many renters are bracing for possible eviction notices. Of all U.S. adults living in renter households, about 15 percent (almost 1 in 7) said they were behind on rent payments as of the two weeks ending May 10, according to a Census Bureau survey that aims to capture pandemic-era hardship. 'The final straw': How the pandemic pushed restaurant workers over the edge Then there is the other America, where people not only kept their jobs but were able to create more wealth for themselves despite one of the worst economic downturns in this country's history. The stark economic divide can be seen in the most recent quarterly retirement analysis by Fidelity Investments. The rich got richer during the pandemic. We need to claw back their gains. "Despite the financial challenges caused by the continued impact of the pandemic on the global economy, average balances across more than 30 million IRA, 401(k), and 403(b) retirement accounts reached record levels," reported Fidelity, one of the country's largest administrators of workplace retirement accounts. The average 401(k) balance increased to $123,900 in the first quarter of 2021, up 36 percent for the same period a year ago. The average 403(b) account balance increased to a record $107,300, which was 42 percent higher than in last year's first quarter. The average IRA balance was $130,000, a 31 percent jump over the first quarter in 2020. The company retirement match remains the norm despite coronavirus recession Millionaires were created in this pandemic. Although the number of millionaires — before taxes — is a relatively small percentage of the total number of retirement plan participants, the growth of members in this select club was staggering. The number of 401(k) millionaires increased 143 percent, hitting 365,000 in the first quarter compared to 150,000 a year earlier, according to Fidelity. The number of millionaires investing in the Thrift Savings Plan (TSP), the federal government's version of a 401(k), also saw a tremendous spike. As of March 31, there were 84,808 TSP millionaires, up from 27,212 a year ago, according to the Federal Retirement Thrift Investment Board. Year over year, that's an increase of 212 percent. The pandemic destroyed 225 million jobs worldwide, but billionaires got richer, reports find Fidelity said workers' faithful commitment to keep investing and stock market performance helped push average retirement account balances to record levels for the second consecutive quarter. Matching contributions matter, too. In the first quarter, the average 401(k) employer contribution rate was 4.6 percent, and the average amount contributed was $1,720. Although some hard-hit companies suspended their matching contribution at the start of the pandemic, by the first quarter of this year, companies made matching 401(k) contributions to 83 percent of employees, Fidelity said. The most popular 401(k) match formula continues to be a 100 percent matching contribution for the first 3 percent of an employee's contribution and then a 50 percent match for the next 2 percent. Fidelity pointed out that many employers are designing their 401(k) and 403(b) plans to help their workers save more by using auto-enrollment. More than a third of companies automatically enroll employees into their 401(k) plan. And, the most common default savings rate for auto-enrolled employees is 3 percent. But an increasing number of companies are pushing their workers to save more by auto-enrolling them at a preset savings rate (although employees can opt out or set their own savings rate). In the first quarter, 20 percent of employees auto-enrolled employees at a 6 percent savings rate. I read the Fidelity report and was happy for folks who have come through the pandemic unscathed financially. The analysis is something to celebrate. More people are saving for retirement. They are undaunted by the gyrations in the stock market. Yet, I can't help but take a pause to consider the extraordinary wealth creation of some Americans while so many others are struggling. Worldwide it's the same trend as here in the United States. So many people were able to prosper during the pandemic. A report earlier this year by Oxfam said the 1,000 richest people on the planet recouped their coronavirus,-related losses within nine months. "For the world's poorest people recovery could take 14 times longer; more than a decade," the Oxfam report said. "The increase in the 10 richest billionaires' wealth since the crisis began is more than enough to prevent anyone on Earth from falling into poverty because of the virus." The billionaire boom While we're feeling privileged that our 401(k)s hit new highs, we ought to remember that hardship remains commonplace among the less fortunate more than a year after the pandemic began. Andrew Van Dam contributed to this column. Reader Question of the Week If you have a personal finance or retirement question, send it to colorofmoney@washpost.com. In the subject line put "Question of the Week." Please note that questions may be edited for clarity. Instead of a new question this week, I want to revisit a topic I covered recently. I want to clarify the answer to a question about children contributing to a Roth IRA. Last week, a reader asked: At what age would you recommend starting Roth contributions for my children? They are 15 and 17. I responded that you can contribute to a Roth IRA if you have taxable income and your modified adjusted gross income is within certain limitations, according to the IRS. A newsletter subscriber emailed and noted that I should have written that for children what matters is "earned income." The reader wrote: "How many 15 year-olds are pulling down a salary or have self-employment income? I'm sure you know this but the questioner and some of your readers may not." It's a good point. The IRS explains that earned income "includes all the taxable income and wages you get from working for someone else, yourself or from a business or farm you own." Examples of earned income are wages; salaries, tips, and other taxable employee compensation, according to the IRS. "Even if you claim your child as a dependent, they may be required to file an income tax return of their own if their gross income exceeds a certain amount set by the IRS," explains Jean Folger for Investopedia. "If your child earns less than this amount, they are likely to be in a 0 percent income tax bracket, and they probably won't benefit from the upfront tax deduction associated with traditional IRAs." Folger points out that "because many kids don't earn enough money to benefit from the upfront tax deduction associated with traditional IRAs, it makes sense in most cases to focus on Roth IRAs. In general, the Roth IRA is the IRA of choice for minors who have limited income now — as it's recommended for those likely to be in a higher tax bracket in the future." For minor children, state, banks, brokers, and investment companies require custodial or guardian accounts, Folger writes. I know a lot of parents want to fund a Roth for their children. But keep in mind, that "if you want to contribute to your child's Roth IRA or match your child's contributions, that's fine as long as she has at least as much earned income as the total contribution amount," says NerdWallet's Arielle O'Shea. "That's easy to determine if the minor gets a W-2," said IRS spokesman Eric Smith. "Note that if she gets a 1099 or is, in some other way, self-employed, she uses the net profit amount." There's a nice discussion of what counts and doesn't count, as well as an accompanying table, in Publication 590-A Contributions to Individual Retirement Arrangements (IRAs) on pages 6 and 7, Smith said. "Though it's part of the discussion of traditional IRAs, we note later in the publication that material applies equally when you're looking at a Roth." One other point worth mentioning about the timing of a contribution: You can make contributions to the Roth IRA for the year up to the due date for filing your return (not including extensions). See page 42 of Publication 590-A. However, if you contribute too much to a Roth IRA, a 6 percent excise tax applies to any excess contribution. Here's a helpful article on this issue: Can You Fund a Roth IRA After Filing Your Taxes? For 2021, you can contribute up to $6,000 to a Roth IRA, or $7,000 if you're age 50 or older. If you're interested in more about Roth IRA for kids read: Starting an IRA for Your Child: The Benefits And this: Why Your Kid Needs a Roth IRA In Retirement News Part of planning for retirement and then living on the money you've saved or invested for retirement is keeping up with the issues that you need to know. In this section, I'll feature blogs, news stories, new research, surveys, and government policy changes that could affect your retirement. And if you see a news story or issue you think would help folks, let me know and I'll check it out and share it with newsletter subscribers. This week, I thought you might like to read about tips on how to keep working. Matt Fuchs, who writes about health and culture, interviewed eight older workers about the wellness habits that have helped them achieve career longevity. "Over the decades, these workers have embraced healthy living in terms of diet, exercise, and mindfulness," Fuchs wrote. "They have also relished challenges, maintained a sense of purpose and continued to learn from job experiences. All of these habits have positioned them to add value at work by sharing wisdom gained over their long careers with younger colleagues. It's a virtuous circle; their approach to work and living leads to their job success, and their job success reinforces their approach to work and life." Read: Don't want to retire? Here's how to maintain a fulfilling career into your 80s and beyond. Retirement Rants and Raves What are your thoughts about saving for retirement? If you're retired, how is it going? What advice would you have for others about retirement? This is your space to rant or rave about anything related to retirement. Send your comments to colorofmoney@washpost.com. Please include your name, city, and state. In the subject line put "Retirement Rants and Raves." Responses may be edited for clarity. | 
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