Research update: 401(k) plan participants stay the course despite market turmoil

In 2008, employees in workplace savings plans contributed to their accounts at normal historical levels, took fewer loans than in 2007, improved their asset diversification and continued to decrease company stock holdings. These are the latest findings from Fidelity Investments' State of the 401(k) update.

"Despite a complex set of financial issues that led to a severe economic and market downturn, workers in 2008 remained committed to saving for retirement through their 401(k) accounts, and engaged with us more in trying to better understand their risk tolerance and an appropriate asset allocation and diversification strategy, " said Scott B. David, president, Workplace Investing, Fidelity Investments, in a press statement.

According to Fidelity's assessments, participants last year contributed an average of $5,600 (pre-tax earnings) to their 401(k) accounts, slightly higher than 2007 levels. Workers continued to contribute to their plans, even in the difficult fourth quarter of 2008, with 96 percent of active 401(k) participants as of the third quarter, continuing to contribute in the fourth quarter. This percentage is in line with normal fourth quarter activity, which always experiences a slight decline in the portion of those participants making pre-tax contributions who have reached the IRS 402(g) limit for the year ($15,500 in 2008).

Despite ongoing contributions into 401(k) plans, unprecedented market declines resulted in the average workplace savings account balance dropping 27 percent in 2008 to $50,200 from $69,200 in 2007.

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