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Helped by strong investment gains during the past four years, employees' 401(k) plan account balances have fully recovered from the beating they took during the bear market for equities, according to a study released Wednesday.
Last year, the average 401(k) account balance for plan participants was $66,500, up 6.5% from $62,500 in 2005 and up nearly 10% from 2004, when account balances averaged $60,600, according to the study by Fidelity Investments, a Boston-based mutual fund provider and 401(k) plan administrator.
Last year's average was significantly above the $64,000 average account balance in 1999--the peak of the bull equities market. Average account balances then tumbled until hitting their low point of about $44,000 in 2002 and have been rising ever since.
For employees who have participated in the same 401(k) plan for the last five years, the size of account balances has, on average, nearly doubled, rising to $111,000 in 2006, up from $59,000 in 2001 and $95,000 in 2005.
The study, which is based on an analysis of the account balances of more than 10 million employees in 13,000 corporate plans serviced by Fidelity, also found a big increase in the number of employers offering automatic enrollment programs. Last year, 301 plans offered automatic enrollment, up from 153 plans in 2005, while 200,000 employees were automatically in the plans, double the number from 2005.
Participation rates and the amounts contributed to the plans varied considerably by age. For example, last year, 67.5% of baby boomers--employees born between 1946 and 1964--participated in their employer's 401(k) plan, while 58.2% of Generation Xers--those born between 1965 and 1978--did so, as well as 28.6% of Generation Yers--those born between 1979 and 1991.
Additionally, baby boomers in 2006 deferred, on average, 7.7% of salary to their 401(k) plans, compared with an average deferral rate of 6.2% for Generation Xers and 4.6% for Generation Yers.
A summary of the findings from the study, "Building Futures VIII," is available at www.fidelity.com.