5/20/2011 11:02 AM ET|
401k balances hit new high
Despite a 12% gain since last year, savers surveyed by Fidelity Investments are hardly feeling flush. Many say they are unsure they'll be financially ready to retire.
The average 401k account balance hit a new high, but that doesn't mean savers are confident about their ability to save enough for retirement, studies show.
The average 401k account balance hit $74,900 at the end of the first quarter, a 12% increase from a year earlier, a 58% jump from the first quarter of 2009 and the highest level since Fidelity Investments started tracking the data, in 1998, according to the retirement-plan provider. Fidelity manages plans for 11 million participants.
People who had contributed continuously for 10 years had an average balance of $191,000, said Beth McHugh, vice president of market insights for Fidelity. Among those 55 or older who had contributed continuously for the past decade, the average balance was $233,800, she said.
About two-thirds of the increase in account balances is due to market gains, and one-third is employer and employee contributions, McHugh said.
Savers appeared to be more optimistic in one respect: About 10% of plan participants increased their contribution rate in the first quarter -- the largest percentage to do so since Fidelity started tracking that data in 2006. A year ago, 7.6% of 401k savers increased their contribution rates.
The average contribution rate stayed at 8.2% of pay, the same that it's been for the past two years. In early 2008, the rate was 8.8%, and in early 2006 it was 8.9%, according to Fidelity.
Still, even as the average account balance marches higher and more people increase the amount they're setting aside for retirement, a separate survey found that a majority of workers say they're not on track to save enough for retirement.
Just 21% of workers surveyed said they are on track with their retirement savings, down from 37% in 2005, according to the annual Retirement Confidence Survey, conducted for the Employee Benefit Research Institute, a nonprofit, nonpartisan organization.
Twenty-seven percent of workers said they are "not at all confident" about saving enough money for a comfortable retirement, the highest level in the 21 years of the survey and up from 22% a year ago, according to the survey in January of 1,004 workers and 254 retirees, all of whom live in the United States and are at least 25 years old.
The survey is conducted for EBRI by Mathew Greenwald & Associates, a Washington market-research company.
Fully 70% of those surveyed said they are not where they need to be in terms of saving for retirement, EBRI said.
"Not surprisingly, the (survey) found that the likelihood of feeling a lot behind schedule is inversely related to household income, household assets, health status and education: The less income, assets, education and health status, the more behind workers tend to feel," EBRI said in a recent news release.
While 31% of workers said they need to save less than $250,000 for retirement, an additional 19% said their goal is $250,000 to $499,999, and 22% said they need to save $500,000 to $999,999, according to EBRI. Seven percent said they need to save $1 million to $1.49 million, and 10% said they need $1.5 million or more.
But a lot of these figures are pure guesswork: 42% of workers surveyed said they guessed at how much money they need to see them through retirement.
Another study that looked at the savings habits of more than 23 million defined-contribution-plan participants (including 401k and other types of defined-contribution plans) found a small sign of optimism. Just 2.4% of savers stopped contributing to their plans in 2010, down from 3.4% in 2009, according to the Investment Company Institute's latest quarterly study. ICI is a fund-industry trade group.
But the ICI study found that the percentage of savers who took a loan from their retirement plan ticked higher: 18.2% of plan participants had an outstanding loan at the end of last year, up from 16.5% a year earlier.
In the Fidelity study, 22.1% of plan participants had a 401k loan outstanding, about flat from 22.5% a year earlier.
Fidelity found that 2.7% of savers initiated a loan in the first quarter, about flat from 2.8% in the first quarter of 2010.
This article was reported by Andrea Coombes for MarketWatch.
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If there is any debt, the picture is even more bleak. As Independentvoter999 pointed out, a mortgage in retirement can be a major problem, even if it's much less than the $2K/month mentioned. That's why my wife and I bought a house that cost less than half of what the bank said we could "afford".
And "guessing" at how much you need for retirement is not wise. With the plethora of retirement calculators and other resources available on the web (for free), there is no excuse for failing to plan.
Either which way, your argument is pathetic. The USA MIGHT go off the financial cliff. The government MIGHT try to steal our retirement accounts. So since these horrible things MIGHT happen, I am not going to bother saving or I will only save what I can put under my mattress earning a nice 0% (-3% when you factor in inflation)? The world MIGHT have ended yesterday but I was still at work Friday instead of on a fun field vacation with my family. If you live your life fearing every single bad MIGHT, you are going to miss out on life.
dendl, Headlines can be so deceiving?
Whats a 10% contribution on 36K? $3600
Whats a 12% return on a 300k 401k balance? $36000, $36000, $36000 DOLLARS!!!!!!!
If you had a 401k you would have noticed the growth in your balance no matter what it was.
I don't understand your comment nor your math.
YES! New Highs Reached! Reliable source is my 401k statement.
dendl, You either don't have a 401k or you really messed it up.
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