(EMAILWIRE.COM, November 18, 2012 ) Benbrook, TX -- An increase in employee saving and employer contributions pushed the average 401(k) balance higher, according to Fidelity Investments.
The average balance reached $75,900 during the third quarter, up 18% over the same time the previous year. That is an all-time high since Fidelity began tracking the number 12 years ago.
The firm analyzed more than 20,000 401(k) plans with 12 million participants. It found that average employee contributions were up 7.3% over the last five years from $5,500 at the end of the third quarter of 2007 to $5,900 in 2012.
During that same period of time, employer contributions, including a 401(k) match and profit sharing contributions, increased 19% from $2,880 in 2007 to $3,420.
Some retirement savers have begun increasing their savings rates, with 4.6% boosting their rates in the third quarter and only 2.8% decreasing their rates during the same period of time.
The Fidelity study revealed that some 401(k) plans with features aimed at increasing savings and participation - including automatic enrollment in retirement accounts and automatic escalation in the amount saved - may, in reality, be causing employees to save less. New participants who were automatically enrolled in their employers plans only saved an average of 3.7% of their pay in the third quarter, while those without automatic enrollment saved an average of 8.4%.
This may be attributed to plans auto-enrolling participants at too low of a default deferral rate, such as the common 3 percent, according to a statement from Fidelity. Fidelity suggests plans adopt a 6 percent auto-enrollment default rate with an automatic escalation of 1 percent annually, up to 10 percent.
Meanwhile, Fidelity 401(k) participants experienced volatility in their accounts over the past several years themselves. The average Fidelity 401(k) was valued at $69,200 in 2007, before dropping to $50,200 in 2008 and then spiking to $64,200 at the end of 2009. By the end of 2010, the average 401(k) account balance was $71,500. It held $69,100 at year-end 2011.
Fidelity was not alone in seeing major losses and rebounds in its 401(k) balances. Vanguard participants average 401(k) balances dipped from $78,411 in 2007 to $56,030 in 2008. Balances rose to $79,077 in 2010, before dropping to $78,276 at the end of 2011.
TenetFinancialGroup.com (http://www.tenetfinancialgroup.com/plandesign.html) customizes a Self-Directed 401(k) plan, using prototypes it has developed for easier facilitation, or amend a pre-existing plan. The company is based in Benbrook, Texas.