401(k) increases signal growing consumer confidence

If you have experienced a noteworthy increase in your personal 401(k) account over the last three years, you are not alone. More

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401(k) increases signal growing consumer confidence

Posted 6/11/12

If you have experienced a noteworthy increase in your personal 401(k) account over the last three years, you are not alone.

According to a report by Fidelity Investments, balances in 401(k) retirement accounts have seen a marked increase in that time and were about 62 percent higher on March 31, 2012, than they were in the first quarter of 2009.

The improvement was a reflection of strong stock market performance and growing consumer confidence in the market. It can also be attributed to an increase in both participant and employer contributions, as some were reduced during the worst of the market downturn, said Fidelity.

However, despite the encouraging results the market still shows signs of volatility. For example, on May 1, the Dow Jones Industrial Average finished at 13,264, its best since Dec. 31, 2007. In just over a month it had dropped to 12,101 on June 5, due in part to austerity measures and elections in Europe, as well as anemic job-creation statistics.

Fidelity reported on May 1 that its average 401(k) balance rose to $74,600 at the end of the first quarter, an increase of 8 percent from the end of the fourth quarter 2011. That is also a 62 percent increase since the end of the first quarter 2009, the unofficial low point of the 2008-2009 market downturn, when the average balance was $46,200.

“The first quarter of this year was a very good year,” said Daniel R. Legault, a senior financial adviser at StrategicPoint in Providence. “So it’s interesting that it is about only one month later [based on the Fidelity report] and the situation has changed.”

Legault could not speak in detail about his own clients, but said “the general sentiment is that people are starting to increase their 401(k) contributions.”

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