Since March 2009, when the S&P 500 plummeted to a 12-year low, 401(k) account balances have surged more than 55 percent to hit at $71,600 on average by the end of the first quarter 2010.
According to new data from Fidelity Investments, participants that stayed the course over the past 12 months of market recovery saw positive momentum for their account growth and performance.
Contribution growth also climbed, with 7.5 percent of participants increasing their contributions, while a smaller 3.5 percent decreased their contributions during the first quarter. Over the past year, average account balances rose 41 percent to $66,900 by the end of first quarter of 2010 and personal rates of return were a positive 42 percent.
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"Over the long run, the tried and true strategies work best when it comes to saving for retirement," said James M. MacDonald, president, Workplace Investing, Fidelity Investments. "Even through all of the volatility of the past couple of years, participants who continued to save in their 401(k) accounts now have a positive return from the start of the downturn in 2008."
Fidelity stated the vast majority of active participants stayed the course throughout the past 18 months, but a small percentage either stopped contributing to their workplace retirement accounts or decreased their equity exposure to zero.
Of the 4.2 percent of participants who stopped contributing to their 401(k) plan sometime between the fourth quarter of 2008 and first quarter 2009, four out of 10 returned to a contribution rate of greater than zero by the end of the first quarter 2010.
A smaller 1.6 percent of participants dropped their equity allocation to zero percent between the fourth quarter of 2008 and the end of first quarter 2009. Of this population, six out of 10 participants (60 percent) kept their equity allocation at zero percent through the end of the first quarter of this year resulting in a negative 6.8 percent change in account balance and an 18-month median personal rate of return of negative 12.7 percent. Nearly four out of 10 participants (38 percent) who decreased their equity exposure re-allocated a portion of their holdings back to equities by the end of the first quarter this year.
Participants also took more of an interest in target-date funds. More than 49 percent of all participants holding all or part of their assets in a lifecycle fund by the first quarter of this year. This is up from just 23 percent in 2005, and only 12 percent in 2000. Nearly one in five (19 percent) participants now holds 100 percent of their assets in a lifecycle fund.
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