Fidelity Says Staying the Course Pays Off

November 11, 2010 ( – Pre-retiree participants who continuously held a 401(k) plan with Fidelity Investments for the past 10 years more than doubled their account balances, according to a Fidelity news release.

The average account balance for these pre-retirees, ages 55 years or older, rose to $211,300 by the end of the third quarter of this year from $96,000 ten years ago. Pre-retirees with a contribution rate at or above 8% this year showed average balances increasing more than 130% over the past 10 years to $291,700, from $125,600.

“The past decade was certainly not a lost decade for participants who remained committed to saving even through all of the market’s ups and downs,” said James M. MacDonald, president, Workplace Investing, Fidelity Investments, in the news release. “A disciplined, systematic savings approach in a diversified portfolio has been the key to building a sizable nest egg for many pre-retirees during one of the most volatile decades in history.”

Participants of all ages learned valuable lessons during the recent economic crisis and put those lessons to work during the third quarter of 2010, MacDonald said. For the seventh straight quarter, participants deferred, on average, 8.2% of earnings to their 401(k)s.

More participants increased their deferral rates (4.2%) than decreased (3.1%), a pattern of positive savings occurring for six consecutive quarters. Fewer participants allocated 100% of their assets to equities at the end of the third quarter (13.1%) as compared to the same period a year ago (14.5%). Strong market returns combined with solid savings rates resulted in average 401(k) account balances increasing 9.4% to $67,600 by the end the quarter, up from $61,800 at the end of the second quarter.

Many retirement investors have benefited by diversifying their asset allocation for more balanced portfolios over the past decade. At the end of the third quarter of 2010, the average equity allocation for all participants was 65.4%, down 13% from the end of the third quarter of 2000. Pre-retirees shifted even further toward conservative investments, seen as a prudent strategy as they transitioned to retirement age. Over the past five years, their average portion of total equity contribution allocations reduced to 57.6% at the end of the third quarter 2010, from 63.6% at the end of the third quarter 2005.

By the end of 2010, Fidelity will have offered defined contribution participants more than 13,000 live onsite workshops at employer locations, plus nearly another 1,400 via the Web and almost 1,000 through on-demand services. During the third quarter of 2010 alone, more than half of all active participants logged onto NetBenefits, Fidelity’s employee benefits portal, or contacted a Fidelity representative to take an account action or seek guidance. Of these participants, the largest population turning to Fidelity for guidance was pre-retirees, the company said.