The Wall Street Journal reported last week on the results of a study conducted by the Employee Benefit Research Institute and the Investment Company Institute on the accounts held by six million workers who consistently participated in a 401(k) plan from 2003 through 2008.
>>The average balance dropped 24% in 2008 (in comparison to the 37% decline in the S&P 500 in 2008…)
>>Over the five years tracked, average account balances for these workers rose about 7% annually, even including the stock-market crash in 2008—thanks, in part, to market gains in the years preceding the crash, but also thanks to workers’ and employers’ continuing account contributions. (This data don’t include market fluctuations in 2009.)
>>The average account balance for these consistent savers rose to $86,513 by the end of 2008, up from $61,106 at the end of 2003. The median balance rose about 11% annually, to $43,700 at year-end 2008 from $25,507 at year-end 2003. (Note: that doesn’t necessarily mean 401(k) investors outperformed the market. The data include worker and employer contributions; that money goes a long way to improving balances, and has a particularly strong effect on smaller accounts.
I hope you stayed consistent with contributing to your 401(k) over the past two years. Have you? A February 2009 survey by AARP showed that nearly 4 out of 10 workers had cut back on the amount they were saving in their retirement accounts and 1 in 5 workers over the age of 45 said they had cut out their retirement contributions entirely!
Giving up like this is one of the worst things you can do right now. If you’re among those who have backed off from your retirement savings plan then you need to hear this:
Given the economic surge that usually follows a deep recession, you couldn’t pick a better time than today to recommit to a wealthy future by saving and investing for retirement. Get back in the game!