Strong employee/employer contributions and a rocking stock market boosted the average 401(k) balance during the first three months of the year. It hit $255,000 for participants age 55 and older who worked at their current employer for 10 years or more, according to a Fidelity Investments quarterly analysis of its 401(k) accounts, which had more than 12 million participants.
Financial planners deserve a nod. They generally recommend that we stay the course, even when the stock market tanks. Those of us 55 and up who didn’t sell off equities during the market downturn got rewarded — average balances nearly doubled from $130,700 during the market low in early 2009, the analysis finds.
The small percentage of older workers who got out of equities in reaction to market volatility in late 2008 or early 2009 — and never rebalanced — saw much more modest growth. Their balance grew 25.9 percent over the same period and hit $101,000 by the end of the first quarter of this year.
“There is a valuable lesson to be learned from the minority of pre-retirees who abandoned equities altogether and experienced significantly less progress,” says James M. MacDonald, president of Workplace Investing at Fidelity Investments. “It’s important to continually remind employees that sticking to [their] savings philosophy may not always reward in the short-term but may over the long-term.”
Participants in other age groups also moved closer to their retirement goals. Average 401(k) balances hit a record high of $80,900 at the end of the first quarter of 2013, almost twice their average balances of $46,200 during the market low in 2009.
The key factors that drove 401(k) balances higher in the first quarter that ended in March: workers saved consistently and held a balanced portfolio with an appropriate mix of equities.
The end of June will mark the end of the second quarter, and 401(k) account holders are likely to see even higher plan balances.
Among other findings:
- Older workers contributed an average 10.3 percent of their annual salaries in their 401(k) accounts during the first quarter.
- Younger participants socked away an average 8 percent during that period.
- Nearly 15 percent of older workers made catch-up contributions during the first quarter. (Employees age 50 and older can stash away an extra $5,500 per year to their 401(k) accounts, for a total of $23,000 in 2013).
In other retirement-related news, Fidelity conducted a survey that examined the behaviors and attitudes of people ages 49 to 67 who were faculty members at colleges and universities. The findings: 74 percent plan to delay retirement past the age of 65 or never retire at all.
- 89 percent want to stay busy and productive.
- 69 percent cited economic concerns, including not having saved enough to retire comfortably.
- 41 percent are unwilling to relinquish access to their institution.
Also of Interest
- 401(k) Balances Hit Record High for Ages 50-54 — $111,900
- How Much Income Will Your 401(k) Provide?
- Join AARP: Savings, resources and news for your well-being
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