A recent analysis by Hewitt Associates of 2.7 million U.S. workers found that the average 401(k) plan balance has dropped 14% in 2008 to $68,000, down from $79,000 in 2007. In October and November 2008 alone, employees lost an average 18% of their 401(k) balance, and some have lost more than 30%. Despite the significant market declines, savings rates have only dropped marginally, from 8.0% in 2007 to 7.8% in 2008. Just 4% of employees have terminated their 401(k) plan contributions altogether. While most workers continue to save, Hewitt’s data shows that some are adjusting their investment mixes and moving money into less risky funds. The average amount of 401(k) assets held in equities is at an all-time low, with only 53.8% of assets compared to 68.1% a year ago and down from its high of 74.2% in 2000. Despite stable 401(k) savings rates, Hewitt’s data also shows that more than 6.0% of workers withdrew money from their 401(k) plans in 2008, up from 5.4% in 2007. The increase is due to an upsurge–16%–in hardship withdrawals.
Does the state where you live affect the likelihood that you will be a participant in a retirement plan? Recent research by the Employee Benefit Research Institute (EBRI) found that Midwestern and Northeastern states had higher participation levels in retirement plans, while Southern and Western states had lower levels. The EBRI data found that for 2007 wage and salary workers ages 21-64 living in Florida had the lowest probability (36.4%) of participating in a retirement plan, while those living in Iowa had the highest probability (58.3%). Wisconsin workers had the highest probability (54.4%) of participation among private wage and salary workers, among full-time, full-year wage and salary workers (67.7%), and for the all-worker definition (49.4%). At the other end of the rankings, EBRI found that Florida had the lowest probability of participation among full-time, full-year wage and salary workers (41.8%).