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Average 401(k) account grows past $100,000

US workers' savings balance up 9.6% since '99

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Bloomberg News / August 25, 2006

The average savings of long-term 401(k) participants pushed past $100,000 last year as they benefited from rising global stock prices, according to a study released yesterday by two Washington-based advocacy groups.

The average account balance of US workers who've participated in 401(k) plans since 1999 grew 9.6 percent to $102,014, the Employee Benefit Research Institute and Investment Company Institute said in a statement.

``What I take away from these results is that through the discipline of savings, little by little, through 401(k) plans, workers can successfully build a nest egg for retirement," Sarah Holden, a senior economist with the ICI, said in a conference call with reporters yesterday. Holden wrote the study with Jack VanDerhei, a professor at Temple University in Philadelphia.

The average long-term investor's account increased from $93,085 in 2004, making last year the third straight with gains. Though returns were smaller than in the two prior years, the Standard & Poor's 500 index, the US benchmark, still advanced 3 percent.

The balance for long-term participants increased 50 percent from $67,785 in 1999, according to the study. Typical accounts ranged last year from $24,169 for workers in their 20s to $140,957 for those in their 60s.

The study didn't quantify how much accounts grew because of individual or employer contributions or from market appreciation.

The average retirement savings of all plan participants, counting those who haven't been consistent investors or are new to the workforce, rose 2.5 percent to $58,328 last year from $56,878 in 2004. Half of all participants have account balances of less than $19,398, the study found.

Fidelity Investments, the largest provider of 401(k) plans, said in a study released Aug. 17 that the average balance for its 9 million participant accounts increased 3 percent last year to $62,500.

President Bush signed a pension reform law last week, permitting more employers to automatically enroll workers in 401(k) plans, making permanent higher ceilings on retirement-plan contributions and allowing plan providers to supply investment advice to participants.

The study found that 15 percent of workers had no stock investments in their accounts. The level was especially pronounced among workers in their 20s, 19 percent of whom didn't have stock holdings.

Boston-based Fidelity and competitors including Vanguard Group and T. Rowe Price Group Inc. have been promoting ``target date" funds, which tailor investments to an investor's age and expected retirement year. The funds are considered low-maintenance options that increase workers' participation and savings levels.

According to the study released yesterday, 43 percent of participants invest in so-called balanced funds, including target-date options, an increase from 27 percent in 2001. Balanced funds invest in both stocks and bonds.

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