Your 401(k) May Actually Be Worth Something Again

We know a lot of people simply stopped looking at their quarterly 401(k) account statements a few years ago, hoping and praying the market would eventually recover and they would someday see all that money lost when the economy went SPLLLAATTT!!. Well, it may be time to take a peek at your next statement, as the latest numbers show very positive signs of recovery.

According to a new report from Fidelity Investments, the average 401(k) account balance is now $74,600. That’s a pleasant 62% increase from when things bottomed out in the first quarter of 2009 and we were all averaging $46,200.

A Fidelity VP attributes the growth to both improvements in the markets and to Americans’ renewed interest in, well… earning interest.

“We’re seeing the benefits of strong markets,” she tells Bloomberg. “We saw the account balance growth more attributable to the market than contributions.”

Fidelity says that around 10% of people with 401(k) accounts increased their savings rate during the first quarter of 2012, while only 4% decreased the amount they were stashing away for the future. Back in the same quarter in 2009, only 5.7% increased their savings rate while 6.4% tightened their belts and decreased the amount they were saving.

At the end of 2011, all 401(k) accounts were worth a total of $3.1 trillion. Lawmakers are currently considering legislation that would lower the cap on pre-tax contributions to 401(k) accounts. Currently, workers under the age of 50 can contribute up to $17,000 annually. Those who are at least 50 years old can contribute another $5,500 each year.

The cash-strapped government is thinking that maybe we don’t need all those tax breaks, which resulted in $130 billion in revenue the feds didn’t get their hands on last year.

Average 401(k) Balance 62% Above 2009, Fidelity Says [Bloomberg]


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  1. Blueskylaw says:

    So it seems that people are putting more money into the market after it doubled from its low a few years ago than when the market was low and stocks were actually worth buying.

    Following the theory of betting against odd-lotters, you should be shorting the market rather than investing in it.

    • sirwired says:

      From the story: “We saw the account balance growth more attributable to the market than contributions.”

      So, apparently, people AREN’T putting that much more money into the market; what they already have there is growing.

      • Blueskylaw says:

        “Fidelity says that around 10% of people with 401(k) accounts increased their savings rate during the first quarter of 2012”

        “Back in the same quarter in 2009, only 5.7% increased their savings rate while 6.4% tightened their belts and decreased the amount they were saving”

  2. MaxH42 thinks RecordStoreToughGuy got a raw deal says:

    Don’t forget to rebalance, both when you’re up and when you’re down.

    If the appropriate level of risk for you is 1/3 in money market funds (very conservative), 1/3 in bond funds (slightly risky), and 1/3 aggressive growth (high risk), when the aggressive growth fund does well, it may become 50% or more of your total investments. You need to occasionally sell off the portion that is over it’s allotment and buy those that are lower so you’re back to 1/3 in each.

  3. BelleSade says:

    I’m sure it’s worth something to people who still have them.

    • HogwartsProfessor says:

      Yeah, really. I HAD to cash mine out when I got laid off. It was so tight last year I couldn’t put anything in. The amount was so low they didn’t allow any other option, and the layoff was completely unexpected. Now I’ll have a tax bill again. Hopefully I’ll have a job next year so I can pay that off too.

      I’m thinking about running away and living in a shack in the woods somewhere, where no one will ever find me. No property, no taxes, no hassle.

      • sirwired says:

        Not that this helps you now, but you could have rolled it into an IRA to avoid the tax bill.

        • Cor Aquilonis says:

          Wrong-o. If you don’t have enough in assets, many plans only allow you to take a check (with automatic withholding for taxes). Sure, HogwartsProfessor might’ve been able to make an indirect transfer to an IRA, but would’ve been taxed/penalized on the withholding. Also, not all custodians will accept a check that’s been signed over on the back (pay to the order of). They want the check to be written out directly to the account.

          • who? says:

            You can always roll it into an IRA. If the balance is low, however, you may have to actually do the work yourself. This wouldn’t have helped Hogwarts, though, since he actually needed the money to live on.

            • HogwartsProfessor says:

              No, it wouldn’t have. It had to be a certain amount to roll over and I never had set one up, since I didn’t anticipate the layoff. Had I had time to plan an exit on my own, I would have done so. In fact, since I knew I had money in there, it was in my 2012 plan. But no.

              Also, I’m a girl, btw. :)

  4. MrObvious says:

    Mine is the highest it has ever been!

  5. yellowdog says:

    “Lawmakers are currently considering legislation that would lower the cap on pre-tax contributions to 401(k) accounts.”

    Nice. Not really surprising. No good deals from the government last forever. Hot tip: Boost your 401k contributions NOW, while you still get the max write-off.

    This speaks to the reason why I’ve never rolled my IRA over to a Roth IRA. I doubt the government will keep its promise to allow people to withdraw that money tax-free. Hope I’m wrong.

    • Nigerian prince looking for business partner says:

      Given the heavy deficit spending of the past decade, I suspect all of those tax deferred 401k contributions are just deferring to a time when marginal tax rates are significantly higher than they are now.

      I put in enough to get my company match but everything else is going into my Roth. I’m betting that tax rates will be much higher in the future.

      • balthisar says:

        Just have to remember to have a bona fide foreign residence, and hope the government doesn’t take away the foreign income deduction. Oh, and be willing to live in Mexico or Thailand.

        • yankinwaoz says:

          Uh.. that won’t work. A distribution from your US 401k is not foreign income. It is US income.

          Actually, you might even end up paying more taxes with your scheme. You have to pay the US tax, and where you are living might also want to tax it too.

          • balthisar says:

            Sorry I missed this so long ago. But, you’re wrong. I’m a professional expat worker. ;)

            Your right about the local taxes — that’s why I specifically mentioned Thailand or Mexico that are friendly to what they regard as foreign income.

            But mostly it doesn’t matter where is the source of the income, but its destination. I’m always paid from the USA, but the first 90k is excluded because I don’t live there. Same for 401(k).

  6. SPOON - now with Forkin attitude says:

    hahahahahahahahhaha as long as you didnt cash it in to keep your house recently.

  7. MaytagRepairman says:

    Interesting information but I feel like a corner of the picture is incomplete by leaving out IRAs. I have very little money in my 401k because I rarely spend more than a few years at any given employer and then when I leave I transfer the money to an IRA.

    • exit322 says:

      That’s been my path so far. I’ve gotten the full company match, but any extra I have goes into an IRA, not the 401K. If down the road those get maximized, then we’ll see.

    • crispyduck13 says:

      I have 2 seperate 401k accounts right now, one for my current and previous employer. I’ve tried numerous times to “roll over” my previous one into a new product, but the investment company keeps telling me I have to give them release papers from my old employer. Every time I ask for these papers the HR lady at the old place tells me she’ll put them in the mail and then never does.

      It’s frustrating to know that it’s my money but I can’t do anything with should I need to. Any advice?

  8. LightningUsagi says:

    I just rebalanced mine last Friday, checked yesterday, and it was already up almost $300. Not a bad income for the weekend.

  9. SpendorTheCheap says:

    Your 401(K) is really worth something again if you kept putting money in while the market dropped to 7000.

    This last decade, people put money into houses when they were at an all time high. The people who stayed in the market this decade, and didn’t put their money into housing are going to look very smart (and well off) in 20-30 years.

  10. OjO says:

    good! I’m tired of feeling like I’m dumping $15k/year into the abyss. Yeah, I know ‘buy low’ & all that. I WAS …with steely nerves… but had a helluva time ignoring quarterly statements showing (in color!! ~red~ nice charts!! ~lower on the right side of the graph~) loss after loss after loss after… (Wait….am I jinxing the market writing in past tense?? ;)

  11. Coelacanth says:

    Reducing the 401(k) contribution limit? Thanks, Congress – for once again screwing the middle class.

  12. Martin says:

    Dollar cost averaging means that buying regular installments of securities which fluctuate in price causes you to buy the most shares when prices are low, fewer shares when prices are high. The 401k plans dollar-cost average automatically because they are generally bought with payroll deductions. The 401k participants who kept on buying stocks after the stock market fell 40% have earned handsome gains now that the stocks they bought at bargain prices have largely recovered.

  13. milkcake says:

    psh, it only matter when you decide to take it out. It can be up now, but if i can’t take it out for another 30 years… anything can happen.

  14. TouchMyMonkey says:

    Lower the cap? Is that in the Ryan budget? Treat the rich while screwing the middle class out of the only really meaningful tax break they get? Figures.

    • bjcolby15 says:

      Actually, this was William Gale, an economist, proposing the following rules:

      1. The 20/20 rule: between the employer and employee, contributions would be limited to 20% of the employee’s income, up to $20,000 a year.

      2. Contributions would become taxable income, i.e. you would be charged taxes for putting money into your 401(k) depending on your tax bracket.

      3. The exclusion from taxable income (i.e. pre-tax deductions) would be replaced with an 18% credit.

      The contributor loses three ways: losing the pre-tax advantage, being pushed into a higher tax bracket, and having their contributions taxed on top of it all.

      For example: I earn $50,000 a year and contribute 25% of my check to retirement, or $12,500 a year. My employer matches 5%, so they put in another $2,500 giving me $15,000 a year – under the $17,000 limit.

      With the 20/20 rules, between my employer and myself, my contributions can total only up to $10,000. I now can only contribute up to 15% ($7,500), but my employer still contributes $2,500. With the 18% credit, my account has $11,800 – a loss of $3,200 to taxation. Furthermore, you have to pay taxes on that $7,500 you contributed, as it is now taxable income.

      If the Congress really wanted to be radical, it could seize ALL $18 trillion of the 401(k) accounts, pay off $16 trillion deficit, and give the $2 trillion back in another financial vehicle. That would also induce the populace to raid Washington with torches and pitchforks, citing theft of retirement funds for government gain.

      tl;dr summary: yes, it punishes EVERYONE.

  15. verymegan says:

    Hold your tongue; my husband is still trying to get mine!

  16. Cordtx says: