Entries in Fidelity Investments (3)


Median 401(k) Balance Down to $23,000

Photodisc/Thinkstock(NEW YORK) -- At the peak of his retirement savings, around 2006, John Taylor had about $66,000 in his employer-sponsored 401(k)—until the recession and a chain of unexpected events drained his fund completely.

Taylor's story may sound unthinkable to many American workers who don't think twice about their employer-sponsored 401(k) plans, which allow workers to set aside untaxed dollars that can accumulate tax-free until retirement. But the Loveland, Colo., 55-year-old's experience can serve as a reminder for those with short-term memories who experienced major retirement account losses as a result of the most recent recession.

The average 401(k) balance rose to $74,600 at the end of the first quarter, up 8 percent from the same period a year ago among Fidelity Investments' 11.8 million accounts, the company reported on Tuesday. The balance increased 62 percent since the end of the first quarter 2009, which is considered the low of the market downturn from 2008 to 2009. In the first quarter of 2009, the average balance was $46,200.

Taylor, a native New Yorker, had been a maintenance worker for a small company in Colorado for 19 years until he was laid off in November 2008. Taylor said he contributed about $100 to $200 per month, sometimes sporadically, to his 401(k) while at that company.

While collecting unemployment in 2009, he first pulled about $10,000 out of his 401(k), which had already dwindled to about $44,000, to support his wife, son and two grandchildren.

He collected unemployment until July 2010, which is when he got a maintenance job for a company in Boulder. He was only at his job for 11 days when he had a work accident while trimming a tree, breaking his wrist and causing ligament damage in his left arm.

Unable to obtain another job and with physical injuries from his accident, Taylor said he also relied on workman's compensation of $240 a week, which ended in June 2011. He was told by his physician and social service worker that he needs to find another vocation.

"At 55, that's kind of hard to do," he said.

No longer eligible for unemployment benefits because of claim limits, Taylor said he exhausted his 401(k) savings by January of this year to make car payments and pay for other expenses. He has been eating from food banks, which he said has contributed to his weight gain of 30 pounds.

Taylor is now applying for disability benefits.

When asked if he would contribute to another employer-sponsored 401(k) fund if given the opportunity, he said, "That's a hard question because I think I would need better financial advice."

An improving stock market is the main driver behind the increase in the average balance in the first quarter this year, accounting for 80 percent of account balance growth. Participant and employer contribution growth contributed to the remaining 20 percent boost.

The S&P 500 index, though experiencing two straight days of losses, has increased more than 11 percent year-to-date.

Individual and employer contributions also tend to fluctuate based on market performance, Beth McHugh, vice president of market insights for Fidelity Investments, said. Last year in the same period, two-thirds of balance growth was attributable to the stock market while one-third was because of participant and employer contributions.

The median 401(k) balance at the end of this year's first quarter was $23,000, according to Fidelity Investments' quarterly report. That's mostly unchanged from the $24,000 a year ago in the same period. But it's an improvement from the first quarter of 2008, when the median 401(k) balance was $18,900.

McHugh said she has noticed a growing culture among employers and employees of trying to save more in a smarter way.

Some plans have fees as high as 2 to 3 percent a year, which the employer or 401(k) company has not clearly disclosed.

That will change this summer when financial regulatory reform will mandate greater transparency for 401(k) fees.

Copyright 2012 ABC News Radio


Survey: Four Out of Ten Millionaires Do Not Feel Wealthy

Adam Gault/Thinkstock(BOSTON) -- The nation's millionaires have spoken, and the magic number above which they feel wealthy is $7.5 million. Four out of 10 millionaires surveyed say they do not feel wealthy, even though they reported an average of $3.5 million in investable assets.

Among the 58 percent of responders who do feel wealthy, they said they began to feel so at $1.75 million in investable assets.

Gail Graham, an executive vice president in Fidelity Institutional Wealth, the group that conducted the survey, said the she believes different definitions of "wealthy" are can be attributed "how much retirement influences how people feel."

While their near-term confidence in the U.S. economy remains negative, their outlook is at the highest level since Fidelity began tracking millionaires' views in 2006.

Graham said the attitudes of millionaires are both a "leading indicator and a causal factor" of the direction of the economy. Representing 56 percent of the nation's wealth, she said the millionaires "have the power to make what they believe happen."

The survey of 1,011 financial decision makers in U.S. households with investable assets of at least $1 million, excluding any real estate holdings and workplace retirement accounts, was conducted online Oct. 18-29, 2010.

The average millionaire who participated in the survey is 56 years old, male, and has $3.5 million in investable assets with an annual household income of $379 thousand. The majority -- 86 percent -- have college degrees, and 46 percent hold graduate degrees.

Those surveyed represent only 5 percent of U.S. households. Sixty percent of participants were male, while 40 percent were female.

Copyright 2011 ABC News Radio


401(k) Accounts Reach a 10-Year High, but Not High Enough

Photo Courtesy - Getty Images(BOSTON) -- There's good news about your 401(k) -- and bad.

Right now the average 401(k) balance stands at a 10-year high. That's according to Beth McHugh, vice president of Fidelity Investments, which administers some 17,000 retirement plans for 11 million would-be retirees. 401(k)s, which have been around for 30 years, are the most widely-used vehicle for saving for retirement.

By the end of 2010, says McHugh, the average account balance had risen to $71,500. Savers who've been actively contributing to an account for 10 years saw their average balance hit $183,100, up from $59,100 at the end of 2000. Those increases are attributable in part to the rebound of the stock market and to the fact that 401(k) participants are saving more: For seven straight quarters, Fidelity says, participants have been increasing the part of their paychecks that they're saving, from 3 percent to a little over 6 percent.

Contrary to myth, says McHugh, most employers did not suspend making matching contributions to employee 401(k)s during the recession. A few high-profile companies, including FedEx, did suspend them, earning headlines. But even during the very worst of the recession, between 2008 and 2009, only 8% of employers reduced or eliminated their matching contributions. And since then, she says, more than half of those have reinstated their matching contributions or have said they plan to do so in the next 12 months. Bigger companies—ones with 5,000 or more employees—are in the vanguard of that trend, with over 70% saying they've already reinstated matching funds or intend to do so.

McHugh refutes another misconception: During the recession, she says, most people did not cash out or take loans against their accounts. Only one out of five participants took out a loan. Even seven out of ten employees who lost their job, were laid off, or otherwise separated from an employer resisted the temptation to cash out their account.

While 401(k)s on average have emerged from the recession in surprisingly good health, many savers on the cusp of retirement are finding that good isn't good enough.

A study commissioned by the Wall Street Journal from the Center for Retirement Research at Boston College finds that the median household headed by a person aged 60 to 62 with a 401(k) has less than one-fourth the amount of savings in that account that he needs, if he wants to maintain his current standard of living in retirement.

The amount of income needed, said the study, is a little over $74,000. The median household can expect to get income of slightly more than $9,000 from a 401(k) and about $35,000 more from Social Security. That leaves a shortfall of almost $30,400.

Even if the householder is lucky enough to have a pension to boot, he's still short by almost $4,000, according to the Boston College study.

Fidelity's McHugh said savers are hardly blind to these facts. They're all too aware of them and are taking steps to compensate.

Copyright 2011 ABC News Radio

ABC News Radio