For the first time in the 20-year history of the popular 401(k) retirement savings plan, the average account lost money last year, even after thousands of dollars of new contributions.
For the first time in the 20-year history of the popular 401(k) retirement savings plan, the average account lost money last year, even after thousands of dollars of new contributions. And despite some strengthening of stock prices in the last couple of months, recent estimates show, the declines persisted in the first half of this year.
... But a look at shifting account balances over the last decade shows that many people have grown overly dependent on stocks, do not contribute enough to retire when they expect to and put too much into a single aggressive mutual fund or their own company's stock, financial planners and plan administrators say. And relatively few employers offer much useful help to workers in making these crucial decisions.
... For many workers, the 401(k) has long seemed to be a magical, ever- expanding account. The plans grew quite popular, partly because they coincided with the strongest and longest bull market in history. They also provided benefits to workers at many smaller companies that did not have traditional pension plans, encouraged saving and created a portable plan better suited for the modern, job-hopping work force.
But this last year has brought a gloomy crop of 401(k) statements, and that has employees wondering whether they made the right decisions in the first place. The average account shrank to $41,919 in 2000 from $46,740 in 1999, according to a report from Cerulli Associates, a benefits consulting firm. Although comprehensive 401(k) account data will not be available for some time, the average account has since shrunk about $600 more, to about $41,300, according to a rough projection by one Cerulli analyst.
"You could be stupid in the last 10 years and make a lot of money," said Mark Bruggemeyer, a 45-year-old co-pilot for Continental Airlines. "Now you've got to buckle down and start learning all over again."