Employees’ 2008 401(k) plan account balances surrendered investment gains earned during the bull market of the past few years and fell to their lowest level since 2002, according to a study released Wednesday, January 28.
Last year, the average 401(k) account balance was $50,200, down 27 percent from $69,200 in 2007, according to the study by Fidelity Investments, a Boston-based mutual fund provider and 401(k) plan administrator. Last year’s 27 percent decline in the value of the average account balance was the biggest year-to-year decrease since Fidelity began to collect such statistics in 1999.
With the fall in the equities markets, participants have been shifting away from investing in stock. In 2008, 16 percent of participants held all of their 401(k) account balances in equities, down from 20 percent in 2007 and 37 percent in 2000.
Contrary to popular perception, the slump in the economy has not led to a surge of loans or withdrawals from 401(k) plans. Last year, 9 percent of participants took out loans, down from 9.7 percent in 2007.
In addition, 1.8 percent of participants took hardship withdrawals in 2008, up slightly from 1.6 percent in 2007.
The study is based on an analysis of the account balances of the more than 11 million employees in 17,095 corporate plans serviced by Fidelity.
A summary is available at www.fidelity.com.
(For a related story, read "House Democrats Contemplate Abolishing 401(k) Tax Breaks.")