Fidelity Reports Average 401k Account Balance Hits 10-Year High

BOSTON, MA, February 23, 2011 -- Fidelity Investments®, the nation's No. 1 provider of workplace retirement savings plans and Individual Retirement Accounts (IRAs), today reported the average 401k balance reached a 10-year high at the end of 2010. Among other highlights of 401k participant and plan sponsor trends from the fourth quarter, Fidelity also dispelled five common misconceptions about the retirement account most widely held by today's working Americans.

"While 401ks have been in existence for more than 30 years and are now the most widely held workplace retirement account by today's American workforce, many misconceptions exist about them," said James M. MacDonald, president, Workplace Investing, Fidelity Investments. "Despite the myths out there, this savings vehicle is, in fact, helping millions of Americans of all income levels save for their futures. Employers are committed to offering a compelling program with a company match as well as lifetime investment guidance to help their employees reach their goals."

Average 401k Balance at 10-Year High

The average 401k account balance rose to $71,500 at the end of 2010, reaching a 10-year high since Fidelity began tracking the data based on the industry's largest participant base of 11 million 401k accounts. For participants who were continuously active for the past 10 years, their average balance increased to $183,100 at the end of last year from $59,100 at the end of the fourth quarter 2000.

Average participant deferrals remained at 8.2 percent for an eighth straight quarter. For a seventh straight quarter, more participants increased their total deferral rate than decreased (6.1% vs. 3.0% respectively).

Five Common Myths about 401ks

Despite its wide usage as a primary savings vehicle for many working Americans, numerous myths exist about 401k plans.

Myth 1: The majority of lower-income employees don't participate in their 401k plan.

• On the contrary, the majority (53%) of participants in 401k plans recordkept by Fidelity earning between $20,000 and $40,000 do participate, and 71 percent of participants earning $40,000 and $60,000 participate.

Myth 2: 401k participants don't take an interest in their retirement plans.

• In reality, Fidelity found workplace participants are increasingly more engaged in their plans. In 2010, approximately three out of four active participants contacted Fidelity via the phone or over the Web. And more than 1.1 million workplace participants took advantage of Fidelity's online guidance tools.
• Of those who used the savings tools, nearly half (47%) increased contributions to their 401ks by an average of three percentage points (from 4% to 7%).
• When employees sought Fidelity's comprehensive guidance with their investment strategy, one in five made adjustments to their portfolio from suggestions based on their age and target retirement date.

Myth 3: Most employers suspended their company match during the recession and have not reinstated it.

• Only 8 percent of Fidelity plan sponsors reduced or eliminated their employer contributions during the height of recession in 2008 and 2009. Since then, more than half (55%) have already or indicated they plan to reinstate this benefit within the next 12 months.
• Larger companies (5,000+ employees) are at the forefront of this trend with 71 percent having already reinstated or planning to reinstate their employer contribution.
• Overall, 80 percent of active participants within corporate defined contribution plans recordkept by Fidelity received employer contributions in 2010.

Myth 4: Most people take loans or cash out of their 401ks.

• A loan from a 401ks is sometimes a necessity for a participant, however, nearly four out of five participants have rejected the urge to take out a loan.
• Seven out of 10 participants opt not to cash out of their 401ks in the months following a separation from an employer, instead wisely electing to stay in-plan or rolling over into another qualified retirement account such as an IRA.

Myth 5: Roth 401ks are only for older, wealthy employees.

• Not true. More than twice as many active participants in their 20s contribute to Roth 401ks than do those aged 50 and older (9% vs. 4% respectively).
• Approximately half of Roth 401k contributors earn less than $75,000, and one in four earns less than $50,000.
• One out of five Fidelity plan sponsors offers eligible employees a Roth 401k. Fidelity's largest plans (more than 25,000 participants) have adopted at the greatest rate with half offering the feature.

More than 51 million American workers take advantage of the convenience of automatic and tax-deferred savings, employer contributions where eligible, and the diversified investment options of workplace retirement plans. Employers understand the increasingly important role this key employee benefit plays in helping Americans prepare for their retirement years, and continue to offer workplace plans that help their workers build more secure futures.

About Fidelity Investments

Fidelity Investments is one of the world's largest providers of financial services, with assets under administration of more than $3.5 trillion, including managed assets of $1.6 trillion, as of January 31, 2011. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.

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