Fidelity: Equities Drive Record Gains Again for 401(k) Savers

Fidelity: Equities Drive Record Gains Again for 401(k) Savers By the end of the first quarter 2013, the average balance on 401(k) accounts reached another record high: $80,900, according to Fidelity Investments, the country’s largest manager of mutual funds.
Considering the steady run-up in equities this year, that may not come as a surprise. But how far some have come from the depths of the financial crisis is striking.
The first quarter average represents an 8.4 percent increase over one year ago when the average balance stood at $74,600, and 75 percent above the market low during the first quarter 2009 — when it dropped to $46,200.
Continued contributions from employees and employers  — on top of the strong equity markets — contributed to the overall gains.
Moreover, 401(k) accounts of pre-retirees (age 55 or older), who had an employment history of 10 years or more with their current employer, showed very strong growth over the last four years.
Average balance for this group reached $255,000 by the end of the first quarter, nearly double since the market low during the first quarter of 2009 when their balance dipped to $130,700.
This group of retirees were most vulnerable during the last market downturn because of the short timeframe to retirement.
“The basic savings principles we encourage workers to adopt, such as saving consistently and holding a balanced portfolio with an appropriate exposure to equities – even when close to retirement – were key factors in driving better outcomes since 2009,” said James M. MacDonald, president, Workplace Investing, Fidelity Investments. “It’s important to continually remind employees that sticking to this savings philosophy may not always reward in the short-term but may over the long-term.”
Unlike pre-retirees that stayed the course, the small percentage of pre-retirees (1.6 percent) who abandoned equities in reaction to market volatility in either late 2008 or early 2009 — and never rebalanced — saw modest growth.
Their balance grew 25.9 percent over the same time period, with balances reaching $101,000 by the end of the first quarter from $80,200 at the end of the first quarter 2009.
“There is a valuable lesson to be learned from the minority of pre-retirees who abandoned equities altogether and experienced significantly less progress,” MacDonald said. “It underscores the combined importance of a proper asset allocation and savings behavior as they planned for retirement within all that life entails.”

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