SALON

Tuesday, May 1, 2012 4:16 AM UTC

Fidelity: 401(k) balances grew average 8 pct in 1Q

By

Topics: From the Wires,

BOSTON (AP) — Employee 401(k) accounts grew nearly 8 percent last quarter as a surging stock market boosted investment returns and worker contributions increased.

Fidelity Investments, the nation’s largest 401(k) administrator, said on Tuesday that the average balance among its nearly 12 million accountholders was $74,600 at the end of March. That’s up from $69,100 at the end of 2011.

Fidelity attributed about 80 percent of the increase to investment performance. Stocks rallied nearly 13 percent, the market’s best first-quarter performance since 1998. A broad bond market index rose just 0.3 percent.

The rest of the average 401(k) balance increase was the result of increased savings by workers as well as matching contributions from their employers.

Fidelity’s 401(k) participants set aside an average $5,810 through paycheck deductions for the 12-month period ended March 31, and employers kicked an additional $3,360. Both numbers are slightly higher than they were a year ago.

The average employee contribution has remained steady at around 8 percent of annual pay for the past three years, says Beth McHugh, vice president of market insights at Boston-based Fidelity.

But saving rates are beginning to tick upward. Nearly 10 percent of Fidelity 401(k) participants increased their contribution rate in the first quarter, while roughly 4 percent decreased it.

Investment earnings and contributions can grow tax-free in an employer-sponsored 401(k) account, which is a key reason why they’re a popular way to save for retirement.

The rise in 401(k) account balances comes as a relief after the average remained largely unchanged in 2011. Although worker and employer contributions increased last year, those gains were offset by factors including investment performance, and mutual fund fees. Account balances are now at their highest level since Fidelity began tracking the data in 1998.

And there was plenty of ground to make up. The stock meltdown in 2008 sent the average account balance down to $46,200 by the time the market hit bottom in March 2009. Since then the average balance has risen 10 of 12 quarters, growing a cumulative 61 percent.

Typically, about two-thirds of annual increases in 401(k) account balances are the result of workers’ added contributions and company matches, with the final third resulting from investment returns.

Yet it’s been a tough battle in recent years. Workers who have stayed in the market haven’t been able to rely on investment gains to build up savings. That’s because stocks are nearly 11 percent below their historic peak in October 2007. Instead, workers have had to rely on building their balances largely through ongoing contributions.

More Mark Jewell.

Next Article

Related Stories

More Related Stories

Featured Slide Shows

The week in 10 pics

close X
  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11
  • Lisa Montgomery embraces her nephew Thursday after a tornado tore apart her home in Cleburne, Texas. The twister killed six people and destroyed entire swaths of the North Texas town.
    Credit: AP/LM Otero

  • Jack McMahon, the defense attorney for abortion doctor Kermit Gosnell, speaks outside the Criminal Justice Center Philadelphia Tuesday. His client was convicted of killing three babies in his clinic, and will serve multiple life sentences.
    Credit: AP/Matt Rourke

  • A photo taken Monday captures Vice President Joe Biden's response to a Milwaukee second-grader's innovative proposal to end America's epidemic of gun violence. This guy!
    Credit: AP/Jenny Aicher

  • Sen. Rand Paul, R-Ky., flanked by a grouper-eyed Michele Bachmann, addresses the IRS' admission that it targeted Tea Party groups in advance of the 2012 election. In an op-ed for CNN Thursday, the Kentucky senator slammed the president for his faux outrage.
    Credit: AP/Molly Riley

  • Ousted IRS chief Steven Miller is sworn in on Capitol Hill Friday. Miller testified before the House Ways and Means Committee on the extra scrutiny the agency gave conservative groups applying for tax-exempt status.
    Credit: AP/J. Scott Applewhite

  • Attorney General Eric Holder pauses as he testifies on Capitol Hill before the House Judiciary Committee Wednesday. Holder is under fire, among other things, for the Justice Department's gathering of phone records at the Associated Press.
    Credit: AP/Carolyn Kaster

  • O.J. Simpson sits during an evidentiary hearing at Clark County District Court in Las Vegas, Nev., Thursday. Simpson, who is currently serving a nine-to-33-year sentence in state prison for armed robbery and kidnapping, is using a writ of habeas corpus to seek a new trial.
    Credit: AP/Las Vegas Review-Journal/Jeff Scheid

  • Major Tom to ground control: On Sunday astronaut Chris Hadfield recorded the first music video from space, a cover of David Bowie's "Space Oddity."
    Credit: AP/NASA/Chris Hadfield

  • When it rains it pours. President Barack Obama speaks during a news conference Thursday with Turkish Prime Minister Recep Tayyip Erdogan, inexplicably inspiring an #umbrellagate Twitter meme.
    Credit: AP/Jacquelyn Martin

  • A smoke plume rises high above a road block at the intersection of County A and Ross Road east of Solon Springs, Wis., Tuesday. No injuries were reported, but the the wildfire caused evacuations across northwestern Wisconsin.
    Credit: AP/The Duluth News-Tribune/Clint Austin

  • Recent Slide Shows

  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11

Related Videos

Comments are not enabled for this story.

follow salon

Most Read

Popular on Reddit

links from salon.com

From Around the Web

Presented by Scribol
listener_new_rect The Listener: So long, Sookie Stackhouse

Recommendations