The typical 401(k) participant now has greater 401(k) retirement wealth than before the severe market downturn, according to a new Vanguard report entitled “Recovery in 401(k) Balances.”
The research also shows that investors holding solely target-date funds had even more positive outcomes relative to other participants, according to Vanguard.
The study looked at Vanguard participant balances between September 2007 and September 2009, a period during which the market peaked in October 2007 and declined dramatically in 2008 and early 2009.
As of September 2009, 60 percent of continuous participants had the same or a higher account balance than they had at the stock market’s October 2007 peak. The balances of 40 percent of continuous participants were lower, although most of them had balances that are less than 20 percent below their earlier peak value.
The organization concludes that three factors led to a meaningful improvement in the retirement holdings of Vanguard 401(k) and other defined contribution plan participants:
o Ongoing contributions to those accounts by participants and matching contributions by plan sponsors.
o The balanced portfolio construction of participant accounts; most participants are not exclusively invested in stocks.