Typical U.S. Worker Saw 401(k) Lose 24.3% in 2008

Maybe it wasn’t so bad after all.

U.S. workers suffered a 24.3% average loss in their 401(k) accounts in 2008, according to a new study from the Employee Benefits Research Institute and the Investment Company Institute. By contrast, the S&P 500 fell 37% while the Barclays Capital U.S. Aggregate Bond Index rose 5.2%.

The average 401(k) account balance was $86,513 at year-end 2008. (At the end of 2007, the average investor had an account balance of $114,337.)

Where did investors stash their cash last year? At year-end, the typical 401(k) investor had 56% of their assets invested in equities via funds and company stock versus a 41% stake in fixed-income securities such as stable value, bond and money market funds. By contrast, that equity stake exceeded 59% in 2007. The market’s mayhem helped drive stock positions down, obviously. “Investment performance likely explains much of the changes in 401(k) participants’ asset allocations over time,” the report says.

This is the most alarming detail of all: While the 72% of workers held 20% or less of their account balances in company stock, nearly 7% of 401(k) investors had more than 80% of their account balance invested in company stock.

Whoa. That takes the risk premium to the extreme.

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