Study shows increase in average 401(k) balances

Buoyed by a stronger stock market, American workers increased their average 401(k) retirement savings account balance from $69,100 at the end of last year to $74,600 at the end of March 2012, according to Fidelity Investments, the largest 401(k) administrator in the U.S.

Most of that growth was attributed to the stock market, which rose 11.2 percent in the first quarter and has doubled in value from three years ago, a point considered the nadir of the bear market.

Although 401(k) balances sometimes increase slightly in the first quarter because of the automatic increases in many plans, this continuing climb was encouraging because 401(k) retirement savings accounts and other retirement investments have taken such a hit in recent years. Investors have also found little help in alternative investments such as savings accounts and CDs since interest rates have been so low.

Not only have many workers had to stop saving, many have had to raid their savings to pay expenses during times of unemployment or other economic setbacks. It also hasn't helped that many employers have suspended matching contributions. At the end of the first quarter 2009, the average account balance was $46,200 -- well below the seven to 10 times your annual income that many experts say is necessary to retire at your current standard of living.

About 20 percent of the 8 percent increase in the average balance came from increases in employee and employer contributions, Fidelity said, with the other 80 percent coming from market gains. This suggests more employees may be taking advantage of annual increase programs, which typically raise savings rates by 1 percent a year.

Despite the increasing savings rates and 401(k) balances, most savers are still a long way from ensuring a comfortable retirement for themselves. The average annual employee contribution rate of 8 percent -- a savings rate that's held steady the last three years -- is still below the 10-15 percent contribution that many advisers cite as optimal.

The average 401(k) savings account balance at the end of 2011 -- $69,100 -- was down slightly from the year before, but this was seen as an encouraging sign nonetheless. More younger workers, who have smaller 401(K) balances, helped drive down the average. In addition, the stock market in 2011 was far less robust, and foreign stocks that make up a part of many 401(k) investments were pushed down by economic uncertainty in Europe.


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