A new report has quantified the damage the 2008 bear market inflicted upon Americans' 401(k) savings and, as expected, it was severe.
American workers lost an average of 30.5% on their 401(k) accounts in 2008, according to a report by the Employee Benefit Research Institute and the Investment Company Institute.
Yet there were some positive aspects to the 401(k) landscape in 2008, according to the report's authors. Even with the bear market losses, they noted, the average 401(k) account balances of consistent participants-those who have had accounts with the same employer each year from year-end 2003 to year-end 2008-last year represented a 7.2% five-year growth rate when worker and employee contributions, and investment gains and losses, were included.This subgroup also saw a lower average decline of 24.3% in their 401(k) balances at the end of 2008.
The report also noted that 401(k) account beat the S&P 500, which was down 37% in 2008.
The report was based on a EBRI/ICI database of 24 million 401(k) account holders, including the subgroup of six million consistent participants.
"Retirement savers, like most investors, suffered during 2008, one of the deepest bear markets in modern history," said Sarah Holden, who heads retirement and investment research for ICI. "But the growth in account balances among consistent participants over five years highlights the benefits of a regimen of disciplined savings in work-place retirement plans."
Among the reports other findings:
The bulk of 401(k) assets continued to be invested in stocks. At the end of 2008, about 56% of 401(k) participants' assets were invested in equities.
The share of 401(k) assets invested in employer stocks was 9.7%, down one percentage point from a year earlier. 401(k) participants have been decreasing their employer stock investments since 1999.
Three quarters of 401(k) plans include target-date funds. At the end of 2008, 7% of assets were invested in these types of funds, which were held by 31% of participants.