<nobr>Mar 4, 2009</nobr>

EBRI Looks at Impact of Recent Financial Crisis on 401(k) Account Balances

A new Issue Brief by the Employee Benefit Research Institute finds that major U.S. equity indexes were sharply negative during 2008, with the S&P 500 Index losing 37 percent for the year, translating into corresponding losses for 401(k) plan assets, but how individual participants were affected was largely determined by their account balance, age, and job tenure. EBRI's Issue Brief estimates changes in average 401(k) balances from January 1, 2008, to January 20, 2009, using the EBRI/ICI 401(k) database of more than 21 million participants.

EBRI says that, not surprisingly, recent financial market losses in individual 401(k) account balances is strongly related to the size of a participant's account balance. Those with low account balances were able to make up their losses through additional contributions; those with larger balances were typically unable to make up those much larger losses, EBRI said. Thus, those with less than $10,000 had an average growth of 40 percent during 2008, since contributions had a bigger impact than investment losses, but those with more than $200,000 had an average loss of more than 25 percent. EBRI's analysis also looks at how long it might take for end-of-year 2008 401(k) balances to recover to their beginning-of-year 2008 levels, before the sharp stock market declines.

Websites:

EBRI Issue Brief

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