401(K) Balances Up 55 Percent In One Year From 2009 Market Bottom

BOSTON – Fidelity Investments, the nation’s number one provider of workplace retirement savings plans, today released 401(k) highlights  from the first quarter of 2010 that showed strong account balance growth and performance for participants that stayed the course over the past 12 months of market recovery.
Positive momentum continued from the prior quarter with 7.5 percent of participants increasing their contributions while a smaller 3.5 percent decreased their contributions during the first quarter.  Over the past year, average account balances rose 41 percent to $66,900 by the end of first quarter of 2010 and personal rates of return  (PRR) were a positive 42 percent.  

 “Over the long run, the tried and true strategies work best when it comes to saving for retirement,” said James M. MacDonald, president, Workplace Investing, Fidelity Investments.  “Even through all of the volatility of the past couple of years, participants who continued to save in their 401(k) accounts now have a positive return from the start of the downturn in 2008.”

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 percent to $71,600 exactly a year later on March 9, 2010, illustrating how quickly market gains can happen after a period of volatility. 

Stopping Contributions and Decreasing to Zero Equity Exposure Cost Participants
While the vast majority of active participants stayed the course throughout the past 18 months, a small percentage either stopped contributing to their workplace retirement accounts or decreased their equity exposure to zero. 

Of the 4.2 percent 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 percent of participants dropped their equity allocation to zero percent between the fourth quarter of 2008 and the end of first quarter 2009.  Of this population, six out of 10 participants (60%) kept their equity allocation at zero percent through the end of the first quarter of this year resulting in a negative 6.8 percent change in account balance and an 18-month median personal rate of return of negative 12.7 percent.  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. 

Participants Using Lifecycle Funds Fare Better Than Most
Adoption of target date funds continued to grow, with more than 49 percent of all participants holding all or part of their assets in a lifecycle fund by the first quarter of this year.   This is up from just 23 percent in 2005, and only 12 percent in 2000.  Nearly one in five (19%) participants now holds 100 percent of their assets in a lifecycle fund, such as a Fidelity Freedom Fund.

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 Freedom Fund for the year ending March 31, 2010.

About Fidelity Investments

Fidelity Investments is one of the world's largest providers of financial services, with assets under administration of $3.4 trillion, including managed assets of $1.5 trillion, as of April 30, 2010. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.

Target date funds are designed for investors expecting to retire around the year indicated in each fund's name. The funds are managed to gradually become more conservative over time. The investment risks of each target date fund change over time as its asset allocation changes. They are subject to the volatility of the financial markets, including equity and fixed income investments in the U.S. and abroad and may be subject to risks associated with investing in high yield, small cap and foreign securities. Principal invested is not guaranteed at any time, including at or after their target dates. 

Past performance is no guarantee of future results. 

Neither diversification nor asset allocation ensures a profit or guarantees against loss. 

The S&P 500® Index is a registered service mark of The McGraw-Hill Companies, Inc., and has been licensed for use by Fidelity Distributors Corporation and its affiliates. It is an unmanaged market-capitalization weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance. It is not possible to invest directly in an index. 

Please note that Fidelity Investments Institutional Services Company, Inc. (FIIS) 401(k) plans, distributed through investment professionals, were excluded from the data provided. 

Before investing in any mutual fund, please carefully consider the investment objectives, risks, charges and expenses.For this and other information, call or write Fidelity for a free prospectus.  
Read it carefully before you invest. 

Fidelity Brokerage Services LLC, Member NYSE, SIPC 900 Salem Street, Smithfield, RI 02917 

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