Sixty-nine percent of participants in public and private defined contribution plans have seen their account balances return to 2007’s pre-financial crisis levels, according to a Mercer survey.
However, the survey of 1.2 million workers in DC plans served by Mercer showed 16% of those under 30 and 36% of those 55 and older have yet to see their account balances return to 2007 levels, according to a news release detailing the survey’s findings.
Also, 7% of those 55 and older lost more than 30% of their account value. Nearly half those 55 and older who lost more than 30% took a withdrawal from their retirement account.
“While the improvement in account balances is certainly encouraging, many participants have essentially lost two years in accumulating retirement savings,” Dave Tolve, retirement business leader for Mercer’s outsourcing business, said in the news release. “For those closest to retirement, these lost years are particularly troubling given that most experts agree this group lacked adequate retirement savings even before the market downturn and now have that much less time to recover.”
Participants have steadily increased contributions since June, when the contribution rate was an average 6.83%. The contribution rate increased to 6.86% by Dec. 31, still below the Dec. 31, 2008, level of 6.96% and the Dec. 31, 2007, level of 7.46%.
“Now more than ever, plan sponsors need to work with their administration providers to clearly communicate the benefits of saving for retirement and the many resources available to help them do so,” Mr. Tolve said in the release.
Bill McClain, Mercer principal and DC consultant, said in an interview that it is important for employees to take a multipronged approach to 401(k) investing.
“Getting them on the path of diversity with a balance between equities and bonds is a great step forward,” he said, noting that employers need to give employees more assistance in understanding their retirement options.