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Member, Beacon International Group, Ltd.
Employees' 401(k) account balances in 2010 continued to climb and are higher than they were before the fall in the equities markets, according to an analysis released Wednesday.
The average 401(k) account balance was $71,500 last year, up 11.4% from $64,200 at year-end 2009, according to Fidelity Investments, a Boston-based mutual fund provider and 401(k) plan administrator. At year-end 2008, the average account balance, battered by that year's plunge in the equities markets, fell to $50,200, a huge drop from 2007 when the average account balance was $69,200.
“You can't underestimate the fact that the markets were very favorable last year,” said Beth McHugh, Fidelity's vp-market insights.
Even with the resurgence of the equities' markets, 401(k) plan participants are more cautious about fully investing their account balances in stock. Thirteen percent of active participants held all of their 401(k) account balances in equities last year, down from 14% in 2009 and 20% in 2007.
Loan activity increased slightly last year. Just over 11% of participants took out a loan from their 401(k) plan last year, compared with 10.6% in 2009.
Fidelity also found that 21% of plan sponsors offer a Roth 401(k) feature, up from just 10% in 2007. In a Roth 401(k) plan, participants make aftertax contributions, but those contributions and investment income can be withdrawn tax-free if certain requirements are met.
The study analyzed the account balances of about 11 million participants in nearly 17,000 corporate plans serviced by Fidelity.
A summary is available at www.fidelity.com/inside-fidelity/employer-services/q4-2011-401k-update.