401(k) Account Balances Hit Record Highs
November 8, 2012
Retirement accounts and contributions are growing bigger, according to Fidelity Investments.
According to the Boston firm's latest data, the average 401(k) balance reached $75,900 at the end of the third quarter, the highest it has been since the company began tracking this data 12 years ago.
In addition, the firm also found that average annual employee contributions has grown 7.3% over the past five years to $5,900 by the end of the third quarter from $5,500 the same quarter in 2007. But average annual employer contributions have grown even more, up 19% to $3,420 from $2,880 in 2007.
Allocations to balanced investments especially increased, with new contributions into options growing to 36% from 20% at the end of third-quarter 2007; 34% went into TDFs, up from 15%. Meanwhile, new contributions into equities decreased to 46% from 62%, while contributions into conservative options remained relatively flat at 18% over the five-year period.
Higher balances and increase contributions were driven by plan features such as auto-enrollment and auto-escalation, which are designed to increase savings and participation.
However, Fidelity believes employers could use such measures more effectively to drive stronger results. New participants auto-enrolled during the third quarter had an average deferral rate of 3.7%, low compared with 8.4% for new participants in plans without auto-enrollment.