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Average 401(k) balances double

By Jennie L. Phipps · Bankrate.com
Thursday, February 13, 2014
Posted: 1 pm ET

Average 401(k) balances hit a record high by the end of 2013, nearly double what they were in March 2009 when the market hit bottom, according to Fidelity Investments, the nation's largest provider of 401(k) plans. The average for all savers is $89,300, up from $46,200 in March 2009.

The average balance for those 55 and older is $165,200. Average balances are lower -- $152,300 -- for those between the ages of 60 and 64, and still lower -- $152,100 -- for people 65 through 69.

Those who have watched their account balances recover and grow are those who didn't panic and who kept saving, says Jeanne Thompson, vice president of Fidelity Investments.

Thompson points out that for people who have saved steadily in balanced accounts over the past 10 years, 56 percent of their increase is from market returns and 44 percent comes from their contributions. "Over the long term, it is the combo that drives growth in account balances," Thompson says. "It's important for people to remember that they can't just save or invest. They have to do both."

This is a lesson that increasing numbers of people are learning, she says. Ten years ago, 40 percent of participants in Fidelity-provided 401(k) plans had 100 percent of their money in either cash or equities. The number of people with such extreme allocations has dropped to 16 percent. Not only are people getting smarter, but the increasing availability of target-date funds and other kinds of managed accounts is making it easier to make better choices, Thompson says.

If you are someone who wants to take a hands-off approach to retirement investment, and at the same time, you don't have the stomach for risk, Thompson suggests that you investigate whether your employer offers a managed account option where a financial adviser invests your money based on your age and financial concerns.

Of course, that advice will cost you more than if you choose your own investments. But delegating this important task to an expert may be a good retirement planning move.

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5 Comments
Steve
February 14, 2014 at 11:56 am

You will probably need increasing annual withdrawal, rising at the rate of increase in your personal spending (perhaps start with CPI). Suppose you have $100,000 and earn 5% per year. You can withdraw $5,000 first year, $5,100 the second, $5,202 the third year, $5,306 the fourth year, etc. Withdrawals increase 2% per year. Money lasts about 30 years. Earn 4% investment return with same withdrawal amounts and it last 25 years. The "withdraw 4% per year" rule of thumb seems too cautious to me. Keep some equity exposure so you can average 4% or more.

Victoria
February 14, 2014 at 11:12 am

I live now on less than $25,000 a year. Sadly it's the least amount of money I've made since my 30's. With the internet my past job (travel agent) is no longer needed. I now work in the Optical Field. Made me laugh at Paul Jay's comment on $25,000 a year. I do it. If I could retire, I still could do it. Maybe even better as my expenses such as clothes, food, gas would go down. I only worry about Social Security not being there. I do invest in a 401K. If I live long enough to use it........I will survive.

paul jay
February 14, 2014 at 9:01 am

Good news? Maybe. But just try and live on $150,000 (more or less) for 25 years! If you withdraw 4% per year, which is the maximum amount recommended by the experts, that's just $6000 a year. How much are you going to enjoy your retirement on that amount? Even when combined with one's social security income, we're only talking about $25,000 per year (more or less). That would not provide for a comfortable, worry-free retirement for most folks. We may be doing somewhat better with our saving and investment rate, but we are no where near where we need to be.

Rob
February 14, 2014 at 7:22 am

What is the average 401k balance today in comparison to the average 401k balance at the peak in 2007?

Paul Benicky
February 14, 2014 at 5:36 am

Great! Now all we have to do is keep the government from finding their way to them and all is well.

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