The average 401(k) balance hit $89,300 at the end of the year, up 15.5% from $77,300 in 2012, according to an annual tally by Fidelity Investments. Most of the boost came from stock market gains as all three major stock indexes ended the year more than 20% higher.
People on the verge of retirement, ages 55 to 64 years old, saw their nest eggs grow to an average balance of $165,200 from $143,300 in 2012, Fidelity said. Savers with both a 401(k) plan and Individual Retirement Account managed by Fidelity had larger nest eggs, with an average balance of $261,400, up from $225,600 in 2012.
The 401(k) has replaced pensions as the way most workers save for retirement. That’s a problem. Most employees spend almost no time actually choosing the right funds in their 401(k). It’s the reason that so many Enron employees lost their retirement when that company went broke. It’s the reason why so many people lost so much in the crash of 2008 – 2009.
Even when their 401(k) holds most of their retirement savings, employees pay little attention. The typical worker is given a list of mutual funds available to the plan and told to check off some boxes to say where his money is going to be invested. The employer does not provide guidance, neither does the investment firm that sold the plan. The typical “Big Box” broker is not paid to provide guidance, and typically doesn’t.
There is help for the worker who wants his money to grow while controlling risk. There are a few RIA firms that can help. If you are one of those whose 401(k) is serious money and you would like to get help, give us a call.