Fidelity Says Average 401(K) Account Balance Reached 10-Year High in 2010

Average balances of 401(k) retirement plans reached a 10-year high at the end of last year as workers continued to save and the market rebounded, according to Fidelity Investments.

The average account balance rose to $71,500 in 2010, up about 11 percent from the end of 2009, according to a report released today by the Boston-based mutual-fund manager. That compares with an average balance of $54,700 in the fourth quarter of 2000, the firm said. Fidelity, the largest provider of 401(k)s, has 11 million participants in almost 17,000 employer-sponsored defined contribution plans.

“This is a very positive finding,” said Beth McHugh, vice president of market insights for Fidelity. “People are saving.”

About two-thirds of the increase in account balances last year was driven by market performance while one-third was attributed to participant action such as contributions, McHugh said. The Standard & Poor’s 500 Index gained about 13 percent last year.

Workers deferred an average 8.2 percent of their salaries to 401(k) accounts last year, a rate unchanged for the past two years, the study said. That figure excludes employer matches, which are typically 50 percent of employee contributions up to 6 percent saved, McHugh said.

Most participants continued to contribute through the financial crisis and recognized that withdrawing funds or borrowing from their plans would have a long-term effect on their ability to retire, said McHugh. Almost four out of five savers didn’t take a loan from their plans last year and 33 percent cashed out when leaving a job. The remainder stayed in their plans or rolled money into individual retirement accounts, she said.

Outliving Savings

Lawmakers and regulators concerned about Americans outliving their savings have scrutinized fees and investments in 401(k)s as retirement money has shifted from traditional pensions to defined contribution accounts. Target-date funds in retirement plans, which move money from riskier assets such as stocks to more conservative alternatives like bonds as a worker ages, lost as much as 41 percent in 2008, according to Morningstar Inc., a Chicago-based research firm.

The fact that participants stayed in 401(k) plans and continued to contribute after the S&P 500 Index lost 38 percent in 2008 is “an ultimate validation that the program is permanent,” said David Wray, president of the Chicago-based Profit Sharing/401k Council of America.

“In the back of people’s minds all along was if we had a bad event, the system would collapse,” Wray said. “This system is now permanent. It’s the real deal. We went through the most horrific experience that plan participants could have and they stayed the course.”

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To contact the editor responsible for this story: Rick Levinson at

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