In the balance: 401(k) participants lose one-third of their assets

The average 401(k) participant lost nearly one-third of their retirement account assets last year because of the market downturn, according to a report released this morning 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% 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% 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 over the five-year period from the end of 2003 through the end of 2008 experienced asset increases at an annual rate of 7.2%, 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. Over the past 20 years, 401(k) plans have become the most widespread private-sector employer-sponsored retirement plan in the United States, the report said. In 2008, 49.8 million Americans had the defined-contribution accounts, holding assets of $2.3 trillion.