The average 401(k) account balance reached $61,000 at the end of 2004, its highest point since 1999, according to a news release from Fidelity Investments. Account balances were up 10% from the previous year.
The average plan participation rate also stabilized after five years of slight declines, according to a Fidelity study of data from 8.6 million participants in 10,800 defined contribution plans serviced by the firm as of Dec. 31. Average plan participation rates remained level with 66% of workers contributing in 2004 and 2003.
"The average 401(k) deferral rate remained steady over the past 12 months at about 7%," said Steve Deschenes, executive vice president of Fidelity Institutional Retirement Services, in the release. "This is a good start, but ... workers who plan to rely on their 401(k) as their primary source of retirement income need to be saving more."
Separately, 45% of 401(k) participants opted for a cash distribution when leaving their jobs in 2004, according to a study of 200,000 participants by Hewitt Associates. The remaining employees stayed in their employer's plan (32%) or rolled the money into an IRA or other retirement plan (23%). Sixty-six percent of respondents who were between 20 and 29 years old took cash distributions, and 42% percent of employees between 40 and 49 elected to cash out.
The size of an employee's plan balance was also a factor, with 73% of participants who had balances of less than $10,000 taking cash distributions, according to the survey. Participants with balances between $10,000 and $20,000 at termination cashed out at much lower rates, although, 31% of these employees elected to take their 401(k) distributions in cash.