Average 401(k) Balances are Up Drastically

Since the stock market's low in 2009, the average 401(k) balance as grown by 75%, mostly due to strong equities. And those pre-retirees who abandoned the stock market saw a much more modest growth in their average 401(k) balance.

Since the stock market’s low in 2009, the average 401(k) balance as grown by 75%, according to a new analysis of Fidelity Investments.

Fidelity’s quarterly analysis of its 401(k) accounts revealed that the overall average balance hit a record high of $80,900 and has increased 8.4% from a year ago. In 2009, during the market’s lows, the average balance was only $46,200.

According to Fidelity, the huge 75% growth since 2009 can be attributed to continued employee and employer contributions as well as the strong equity markets. However, equities account for 65% of the overall average balance increase.

“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,” James M. MacDonald, president of Workplace Investing, Fidelity Investments, said in a statement. “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.”

However, not all investors enjoyed the same growth. The 1.6% of pre-retirees who abandoned equities in reaction to market volatility during the recession and never rebalanced experienced a much more modest growth of just 25.9% over the same time. However, these pre-retirees had a larger average balance. At the end of the first quarter in 2009, the average balance was $80,200 for these pre-retirees and their balances now reach $101,000.

“There is a valuable lesson to be learned from the minority of pre-retirees who abandoned equities altogether and experienced significantly less progress,” said MacDonald. “It underscores the combined importance of a proper asset allocation and savings behavior as they planned for retirement within all that life entails.”