Ross Kerber, Reuters
May 11, 2011
Stock market gains helped drive up
balances in the average U.S. 401(k) retirement-savings account to a
record $74,900 as of March 31, up 12 percent from a year ago, said
The total is the highest since the giant
Boston fund firm began tracking the figures in 1998. Fidelity gave the
number in its quarterly update on 401(k) accounts to be released on
Fidelity's figures are closely followed
by retirement specialists because the firm is the largest administrator
of retirement savings plans, covering roughly 11 million workers.
Its data is seen as an indicator of how
well retirement savings are rebounding as the U.S. economy rebounds
from the recession that ended in 2009.
Of the increase over the past year,
two-thirds was due to market gains and the rest to continued
contributions by workers, said Fidelity Vice President Beth McHugh, who
oversees the area.
SOME WORKERS STASHING MORE AWAY
McHugh said that about 10 percent of
plan participants increased their contribution to savings plans in the
past quarter, while 3.2 percent cut their contributions.
That marked a turnaround since the
depths of the financial crisis in late 2008, when more people were
cutting their contribution rate, a likely sign of households being
under pressure from job losses.
Other measures still showed stress,
however, notably the percentage of plan participants who have borrowed
money from their 401(k) accounts. This stood at 22.1 percent of
participants as of March 31, down just slightly from 22.4 percent at
Dec 31, the all-time high.
Fund companies like Fidelity, T Rowe
Price Group (TROW.O) and Legg Mason Inc (LM.N) have benefited from rules designed to
encourage private retirement accounts as a supplement to Social
Security and other retirement savings.
The 401(k) movement has risen as many firms have
abandoned defined-benefit pension plans, leaving workers much more
exposed to market volatility, especially in equities, as they craft
their retirement strategy.
Individuals have reduced their equity
fund holdings in response, in favor of more fixed-income investments,
although Fidelity and other companies lately have encouraged workers to
keep their asset mix at levels tied to their ages and comfort with
risk, and not to abandon equity-based funds.
The steady upward crawl of average 401(k) balances
has eased some of the political pressure on the accounts. At the same
time, it isn't clear what behavioral changes investors might make after
the wild ride some of their funds took with markets, said Jack
VanDerhei, research director at the Employee Benefit Research
Institute, a Washington trade organization.
VanDerhei plans to study whether the recovery of
balances will encourage workers to save more in their accounts, where
possible -- and whether savers have grown more cautious in their
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