Fidelity Investments reported good news heading into the weekend: balances in Fidelity retirement accounts climbed to record levels as of March 31. The company's quarterly analysis found that the average 401(k) balance hit $95,500, while the average IRA balance was $98,100.

Sure, the market run-up is partly responsible—but here's the rest of the story: A record 27 percent of Fidelity 401(k) investors increased their individual savings rate in the last 12 months. Savings rates also increased for IRA holders. And note this: Among Millennials (defined here as those born between 1981 and 1997) there was "a 42 percent increase in number of accounts receiving contributions and [a] 51 percent increase in the amount of contribution dollars."

Unfortunately, Fidelity didn't provide base numbers for its Millennials stat, so that "42 percent increase" could be a sizeable increase in what was a small number to start with. Even so, it appears many younger workers are getting more serious about saving for the future.

Employers are playing a role too. As Bloomberg reports,"Some large employers have added to plan designs to bump up savings rates."

Auto-escalation, as it's called, often used in concert with automatic enrollment of new hires into the company 401(k), nudges employee contribution rates up one percentage point a year until they reach a cap. Many employers leave it to workers to opt in to auto-escalation, but 16.1 percent of Fidelity's plans make it automatic on enrollment in a plan.

The idea of "auto-escalation" is similar to what we described in our May Level 2 article, "A SMarT Way To Boost Your Saving and Investing." It works because you "do everything possible to make the path of least resistance the positive path of boosting your savings amount, rather than the negative path of simply boosting your spending each time you get a raise."

Says Jeanne Thompson, a senior vice president at Fidelity: "Auto-escalation isn't all that widespread, yet is driving 50 percent of the savings increases" among those who have stepped up their retirement-plan contributions.

SMI has long been a proponent of automating your savings. Unfortunately, the employer-suggested default for retirement savings is often woefully low—often only 3% of the employee’s salary. So auto-escalation is a useful tool in the retirement-planning toolbox. And, remember, it's something you can put into practice on your own if your employer doesn't offer it.

  • What savings rate should you shoot for? There is no hard-and-fast rule, but 15% of your salary is a reasonable target for an auto-escalation plan.  
  • Already use auto-escalation? We'd love to hear about your plan. Tell us about it the comments section.

(And for various scenarios illustrating how your savings rate now will affect your future finances, check out MoneyGuidePro®, available to SMI premium members.)