• 16
  • May
    2011

Amidst the many financial crises that have arisen during the economic recession, there is one that has received surprisingly little attention from the government and the media: the decrease in many Americans' retirement funds. With the current uncertainty about the Social Security retirement program, the drop in retirement savings led many analysts to predict that Americans were heading for bankruptcy or other financial disaster when they reached retirement. However, a new report indicates that retirement accounts are healthier than they have been in over 10 years, lessening the severity of many of those harsh predictions.

Analysts believe that the decrease in retirement funds occurred for two reasons. First, Americans were taking money out of their retirement savings accounts to make house, car and other loan payments. Second, the wavering stock market led many retirement investments to drop significantly.

According to recent reports from retirement giant Fidelity, which manages the retirement plans of approximately 11 million people, the average 401(k) retirement plan now contains an average of $74,900. This is the highest average retirement account balance on record since the company began tracking the data in 198.

That average balance has increased by 12 percent from just one year ago, the company reports. Approximately one-third of this rise is attributable to increased contributions by account holders, with two-thirds attributable to stock market gains.

Fidelity also reports that older workers have higher retirement savings account balances than younger workers. For example, account holders aged 55 or older have an account balance of almost $234,000, which is an increase of $30,000 in the last year.

However, company data indicates that many Americans are still experiencing financial instability. Approximately 22 percent of Fidelity account holders have borrowed money from their 401(k) accounts in the last year, and 3.2 percent have completely cut out their contributions during the past quarter.

Source: Reuters, "Average 401(k) balance near $75,000: Fidelity", Ross Kerber, 11 May 2011