Average 401(k) balance near $75,000: Fidelity

BOSTON Wed May 11, 2011 11:53am EDT

A money changer shows some one-hundred U.S. dollar bills at an exchange booth in Tokyo November 8, 2010. REUTERS/Issei Kato

A money changer shows some one-hundred U.S. dollar bills at an exchange booth in Tokyo November 8, 2010.

Credit: Reuters/Issei Kato

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BOSTON (Reuters) - Stock market gains helped drive up balances in the average U.S. 401(k) retirement-savings account to a record $74,900 as of March 31, according to Fidelity Investments.

The figure is up 12 percent from a year earlier and is the highest since the giant fund firm began tracking the data in 1998. Fidelity gave the number in its quarterly update on 401(k) accounts released on Wednesday.

Fidelity's figures are closely followed by retirement specialists because the Boston-based firm is the largest administrator of retirement savings plans, covering roughly 11 million workers.

Its data is seen as an indicator of how well retirement savings are rebounding from the financial crisis.

Of the increase over the past year, two-thirds was due to market gains and the rest to contributions by workers, said Fidelity Vice President Beth McHugh.

OLDER WORKERS HAVE MORE ASSETS

Averages were higher for older workers and those who have added steadily to their 401(k)s. Among those active in a plan for 10 straight years, the average balance at March 31 was $191,000, up from $169,200 a year earlier; within that group, those 55 and older had saved $233,800 on average, up from $203,600 a year earlier.

McHugh said about 10 percent of plan participants increased their 401(k) contributions in the past quarter, while 3.2 percent cut their contributions.

In the depths of the financial crisis in late 2008, more people were cutting their contributions, a likely sign of households being under pressure from job losses.

Other measures still showed stress, however, notably the percentage of plan participants who have borrowed money from their 401(k) accounts. This stood at 22.1 percent of participants as of March 31, down just slightly from 22.4 percent at December 31, the all-time high.

Fund companies like Fidelity, T Rowe Price Group and Legg Mason Inc have benefited from rules designed to encourage private retirement accounts as a supplement to Social Security and other retirement savings.

The 401(k) movement has risen as many firms have abandoned defined-benefit pension plans, leaving workers much more exposed to market volatility, especially in equities, as they craft their retirement strategy.

Individuals have reduced their equity fund holdings in response, in favor of more fixed-income investments, although Fidelity and other companies lately have encouraged workers to keep their asset mix at levels tied to their ages and comfort with risk, and have warned against abandoning equity-based funds.

The slow but steady rise in average 401(k) balances has eased some of the political pressure on the accounts. At the same time, it is not clear what behavioral changes investors might make after the wild ride some of their funds took during and after the financial crisis, said Jack VanDerhei, research director at the Employee Benefit Research Institute, a Washington trade organization.

VanDerhei plans to study whether the recovery of balances will encourage workers to save more in their accounts, and whether savers have grown more cautious in their investment choices.

(Reporting by Ross Kerber, editing by Bernard Orr and John Wallace)

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Comments (3)
kbwalker wrote:
Average 401k balance even if adjusted for inflation tells you very little about peoples’ preparedness for retirement. The author should have done enough research to address balances for different age groups. Obviously, there is a big difference between a 30-year old having $75K in his 401k vs a 60-year old. The former is off to a good start, the latter will probably not be able to live off his savings.

May 11, 2011 8:27am EDT  --  Report as abuse
DrJJJJ wrote:
Expect low single digit returns for a decade or more now/ time to sell! To many forces working against further robust growth (mile long list)! You’ve been warned!

May 11, 2011 12:59pm EDT  --  Report as abuse
hilarity wrote:
This ignores the tens of millions of people who
do not have 401k’s at all ! This is an average
only of those who have them.

May 12, 2011 8:28am EDT  --  Report as abuse
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