Having watched 401(k) account values drop precipitously, investors may fear that their savings in these defined-contribution plans will never get them through retirement. They may also wonder how their plans measure up against others.
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So what does the 401(k) landscape look like? And how does your plan rate against others? We asked BrightScope—a new online database that has analyzed more than 1,000 plans, based on information from companies and filings from the U.S. Labor Dept. and Securities & Exchange Commission—to sift through those plans with at least $100 million in assets. We also culled national data from the Employee Benefit Research Institute, the Center for Retirement Research at Boston College, the Federal Reserve's 2007 Survey of Consumer Finances, and other sources, as a benchmark.
Here, then, is what Americans' retirement savings look like today.
401(k) Plan Assets
2008: $2.4 trillion2007: $3.0 trillion
If you've opened your 401(k) statement lately, you know just how bad the market meltdown has been for your future retirement. Total 401(k) plan assets shrunk from $3.0 trillion at the end of 2007 to $2.4 trillion at the end of 2008, according to estimates from the Employee Benefit Research Institute.
Data: Estimates from the Employee Benefit Research Institute
401(k)sWhat does that shrinkage in 401(k) plan assets mean for you? According to a survey by Fidelity, the average 401(k) participant's balance fell by 27% in 2008, to $50,200, from $69,200 the previous year. The market's decline had a smaller impact than you might expect because most participants continued to make contributions to their 401(k) plans—and the majority of employers continued to match those contributions.
Data: Fidelity
Defined-Contribution Plan Participants Who Stopped Contributions
2008: 3.1%2007: 2.4%
The vast majority of employees offered 401(k)s do contribute. But as the market fell, the number who stopped making those contributions edged up to 3.1% in 2008, from 2.4% in 2007, according to data from fund giant Vanguard. As the economic outlook continues to worsen, it seems likely that number will continue to rise this year.
Data: Vanguard
Loans and Hardship Withdrawals
2008:Loans: 9.0%
Hardship Withdrawl: 1.8%
2007:
Loans: 9.7%
Hardship Withdrawl: 1.6%
You might think that there would have been a large spike in the number of people taking loans or hardship withdrawals from their 401(k)s last year, but that's not been the case. Fidelity data on 401(k) loan usage and hardship withdrawals showed no significant behavioral changes. For the 9% who did take loans in 2008, the average amount was $8,400. The average hardship withdrawal—permitted only in cases of immediate financial need, such as medical emergency or foreclosure—was $6,000.
Data: Fidelity
Ten Largest 401(k) Plans by Net Assets
1. IBM—$30.8 billion2. Boeing (BA)—$27.5 billion
3. General Electric (GE) —$26.2 billion
4. ExxonMobil (XOM)—$21.6 billion
5. Lockheed Martin (LMT)—$19.2 billion
6. Procter & Gamble (PG)—$15.1 billion
7. United Technologies (UTX)—$13.7 billion
8. JPMorgan Chase (JPM)—$13.2 billion
9. Chevron (CVX)—$13.2 billion
10. Citigroup (C)—$13.0 billion
The largest 401(k) plans by assets span an array of major companies, with IBM, Boeing, and General Electric at the top of the list. Missing from the list are major companies like Wal-Mart (WMT), Home Depot (HD), Sears (SHLD), and UPS (UPS), which top the list of large plans ranked by number of participants, but fall short on assets. Given the lag time for reporting valuations and the past year's market declines, it's likely that these plans have shrunk from the valuations noted above.
Data: BrightScope
Best Three Plans by Account Values
ExxonMobil: $490,000Saudi Arabian Oil: $450,000
Chevron: $370,000
The three richest plans, by average participant balance, are all oil companies. Saudi Arabian Oil, however, has just 2,900 total participants. ExxonMobil has 44,000, and Chevron has 36,000.
Data: BrightScope
Best Three Plans by Fees (% of Assets)
Weyerhaeuser (WY): 0.36%Georgia-Pacific: 0.37%
Vanguard: 0.38%
What's the cost of your 401(k)? It's not so easy to tell because fees come in so many different forms in 401(k)s, and some are covered by the company while others are picked up by the participant. Fees have been a hot topic in Washington, and in the courts, where a number of big plans have been sued over them. The lowest fee for plans with at least $100 million in assets in the BrightScope database is 0.36%, while the highest is 1.87%. That may not sound like a lot, but because of the power of compounding over the many years that you're in the plan, it's a huge difference.
Data: BrightScope
Worst Three Plans by Fees (% of Assets)
MPS Group (MPS): 1.87%AutoNation (AZO): 1.87%
O'Reilly Automotive (ORLY): 1.82%
Fees matter in mutual funds, and they matter in 401(k)s, too, even if they're harder to see. The three plans with the highest fees charge more than 1.8% of assets—that is, more than $1,800 a year for a participant with a $100,000 balance.
Data: BrightScope
Typical Company Match
The typical company match is 50¢ for each dollar contributed by the employee up to 6% of earnings. If you're offered a match, you should take it—it's essentially free money.Data: Center for Retirement Research at Boston College
Top Five Holdings in 401(k) Plans
Ranked by asset values, with one-year returns (through Mar. 9, 2009)1. Vanguard Institutional Index Fund, -46.2%
2. Fidelity Diversified International Fund, -53.3%
3. Pimco Total Return Fund, 1.5%
4. Vanguard Primecap Fund, -41.5%
5. Fidelity Contrafund, -40.8%
The top five funds in 401(k) plans by assets are all solid, well-regarded funds, offered by giant fund firms Fidelity, Vanguard, and Pimco. But only one—Pimco Total Return Fund, a bond fund—eked out a positive return over the past year. The others, which are all equity funds, cratered by 40% or more. The returns for the top five funds, ranked by assets, are shown above.
Data: BrightScope, Morningstar
Click here for more on how your 401(k) stacks up.
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