Benefits

Market Meltdown Costs 401(k) Participants One-Third of Their Retirement Savings

By Staff Report

Oct. 7, 2009


The average 401(k) participant lost nearly one-third of his or her retirement account assets in 2008 because of the market downturn, according to a report released Tuesday, October 6, by the Investment Company Institute and the Employee Benefit Research Institute.


At the end of 2008, the average account balance was $45,519—a 30 percent decline compared with the $65,454 average account balance at the end of 2007. This substantial decline factors in contributions by workers and employers to 401(k) plans last year, which were handily offset by declines in most global equity and bond markets.


The Standard & Poor’s 500 stock index, for instance, fell 38.5 percent during 2008.


The ICI/EBRI report, “401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2008,” was based on a survey of 24 million 401(k) plan participants in 54,765 plans holding $1.1 trillion in assets.


Retirement savers, like most investors, suffered during 2008, one of the deepest bear markets in modern history,” Sara Holden, the ICI’s senior director of retirement and investor research, said in a release. “But the growth in account balances among consistent participants over five years highlights the benefits of a regimen of disciplined saving in workplace retirement plans.”


Indeed, workers who invested in their 401(k) plans regularly during the five-year period from the end of 2003 through the end of 2008 experienced asset increases at an annual rate of 7.2 percent, even with the 2008 losses, according to the report. The average account balance of the “consistent” participants, as the report labeled them, rose to $86,513 at the end of 2008, from $61,106 at the end of 2003.


During the past 20 years, 401(k) plans have become the most widespread private-sector employer-sponsored retirement plan in the U.S., the report said. In 2008, 49.8 million Americans had the defined-contribution accounts, holding assets of $2.3 trillion.



Filed by Sara Hansard of InvestmentNews, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.


Stay informed and connected. Get human resources news and HR features via Workforce Management’s Twitter feed or RSS feeds for mobile devices and news readers.

About Workforce.com

blog workforce

We build robust scheduling & attendance software for businesses with 500+ frontline workers. With custom BI reporting and demand-driven scheduling, we help our customers reduce labor spend and increase profitability across their business. It's as simple as that.

Book a call
See the software

Related Articles

workforce blog

Benefits

EEOC says that employers legally can offer incentives to employees to get vaccinated in almost all instances

If you’re an employer looking to get as many of your employees vaccinated as possible, you can rest eas...

ADA, CDC, COVID-19, EEOC, GINA, pandemic, vaccinated

workforce blog

Benefits

Fixing some common misconceptions about HIPAA

Ever since the CDC amended its COVID-19 guidance to say that the fully vaccinated no longer need to wea...

COVID-19, health care, HIPAA, human resources, wellness

workforce blog

Benefits

We are in the midst of a public mental health crisis; how employers can help

Do not ignore these issues or your employees who are living with them. Mental health illnesses are no d...

ADA, benefits, Coronavirus, FMLA, mental health, paid time off