2009 a Good Year for DC Participants – Considering...

July 23, 2010 (PLANSPONSOR.com) – The latest study by The Vanguard Group of its defined contribution recordkeeping data was full of good news with word that many of the 3.2 million participants in plans it recordkeeps ended 2009 in relatively good retirement shape despite the economic downturn.

A Vanguard news release about its “How America Saves 2010” report said many participants in 2009 experienced higher account balances, traded minimally in response to market volatility, increasingly diversified their assets through automatic investment programs, and protected their retirement nest egg when they left their employer. The study included data from 2,200 DC plans.

Only ”a very small group of participants” appeared to be hurt by the economy, leading to a “modest” decline in plan participation and savings rates and slight increases in loans and hardship withdrawals, Vanguard said.

“Despite the financial maelstrom of the past few years, we’re seeing positive signs for many participants in employer-sponsored retirement plans,” said Steve Utkus, head of Vanguard’s Center for Retirement Research and a co-author of the report, in the news release. “While there continue to be opportunities to improve saving rates and asset allocations, employees covered by these plans are benefiting from improved plan design, such as automatic enrollment and automatic deferral rate increases, as well as target-date funds.”

According to the Vanguard data, the average account balance at the end of 2009 was $69,000, up 23% from year-end 2008. About two-thirds of participants had account balances at the end of 2009 that were higher than they were in September 2007, just prior to the stock market peak in October 2007.

The median account balance rose by 10% for participants who had a balance in September 2007 and at year-end 2009, reflecting the effects of improving asset values and ongoing contributions. Over this 27-month period, only 6% saw declines of more than 30%.