RISMEDIA, October 13, 2009—(MCT)-So just how bad was the market meltdown for 401k savers?
Pretty bad. So bad that most savers probably don’t need a study to confirm it.
But here are some official numbers recently released from the Employee Benefit Research Institute and the Investment Company Institute:
-Many American workers suffered an average 24.3% decline in their 401k account balance in 2008. The research is based on workers who held 401k accounts consistently from 2003 through 2008.
-These consistent participants saw their account balances increase at an annual average rate of 7.2% during the entire five-year timeframe, even after the 2008 losses, according to the study.
-At year-end, more than half of 401k assets were invested in stocks through equity funds, balanced funds and shares of their company’s stock.
-The share of 401k accounts invested in company stock fell to 9.7% in 2008, down nearly 1 percentage point. The study noted that recently hired 401k participants were less likely to hold stock of their employer in the 401k plan.
Take employees in their 20s. The study noted that in 1998, nearly 61% of recently hired workers in their 20s would have held company stock in the 401k plan. By 2008, that dropped to about 33%. In general, experts say savers take on too much risk if they’re putting a large amount of their 401k money on one stock, such as the stock in the company where they’re working. More investors saw the wisdom of avoiding too much company stock, especially after disaster stories at companies such as Enron. Other companies stopped making matches in company stock.
(c) 2009, Detroit Free Press.
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