BOSTON – Employee 401(k) accounts are growing fast, thanks to the surging stock market and increased contributions from workers and their employers.
The average account balance grew nearly 12 percent last year, Fidelity Investments said last week. The average was $77,300 at the end of 2012, up from $69,100 a year earlier, according to Fidelity, the nations largest 401(k) administrator.
The average balance is up sharply since the stock market hit bottom in early 2009, following the financial crisis. Back then, the average was $46,200.
In the final three months of last year, 401(k) balances rose a modest 2 percent. The average balance was $75,900 at the end of the third quarter.
Fidelity estimates that about two-thirds of last years increase in the average 401(k) balance was attributed to investment returns and one-third to worker contributions and employer matches.
Over the past 10 years, those two components have played a roughly equal role in boosting account balances, with 53 percent attributed to contributions and 47 percent to market gains.
You really need to contribute to your account because those contributions have an equal weighting to the market appreciation over the long term, says Beth McHugh, vice president of market insights at Boston-based Fidelity.
Investment earnings and contributions can grow tax-free in an employer-sponsored 401(k) account, which is a key reason why theyre a popular way to save for retirement.
Yet the S&P 500 remains about 3 percent below its historic peak in October 2007.