Fidelity Reports 401(k) Balances up 55% Since Market Bottom

May 19, 2010 ( - Fidelity Investments 401(k) highlights from the first quarter of 2010 shows strong account balance growth and performance for participants that stayed the course over the past 12 months of market recovery.

Over the past year, average account balances of participants in Fidelity-serviced plans rose 41% to $66,900 by the end of first quarter of 2010 and personal rates of return (PRR) were 42%. From the bottom of the equity markets on March 9, 2009, when the S&P 500 hit a 12-year low, average account balances surged more than 55% to $71,600 exactly a year later on March 9, 2010, according to a press release.  

Positive momentum continued from the prior quarter with 7.5% of participants increasing their contributions, while just 3.5% decreased their contributions during the first quarter. Of the 4.2% of participants who stopped contributing to their 401(k) plan sometime between the fourth quarter of 2008 and first quarter 2009, four out of 10 returned to a contribution rate of greater than zero by the end of the first quarter 2010.  

A smaller 1.6% of participants dropped their equity allocation to zero percent between the fourth quarter of 2008 and the end of first quarter 2009.  Sixty percent kept their equity allocation at zero percent through the end of the first quarter of this year resulting in a negative 6.8% change in account balance and an 18-month median personal rate of return of negative 12.7%, Fidelity said.    

Nearly four out of 10 participants (38%) who decreased their equity exposure re-allocated a portion of their holdings back to equities by the end of the first quarter this year.   

Adoption of target date funds continued to grow, with more than 49% of all participants holding all or part of their assets in a lifecycle fund by the first quarter of this year – up from just 23% in 2005 and only 12% in 2000.  Nearly one in five (19%) participants now holds 100% of their assets in a lifecycle fund.

Fidelity found that of those participants who did not fully allocate their assets into a lifecycle fund, more than six out of 10 (62%) underperformed their age-based Fidelity Freedom Fund for the year ending March 31, 2010.