RSS FeedIt’s about time…the good news about 401(k)s has finally surfaced, thanks to an article from the Wall Street Journal. After all the hand-wringing over 401(k) balances that took a tumble last fall, and ideas proposed by some in Congress over what to do about it (mainly nanny-state schemes of allowing the government to manage retirement accounts), it has been noticed that balances are bouncing back. (Thank you to WSJ’s Karen Blumenthal)
Admittedly, some 401(k) accounts have not bounced back as quickly as others. As Karen points out, younger workers with smaller balances have fared better than older workers with large balances. The reason is younger workers were able to make up more of their losses through their contributions since they are a large part of a younger worker’s account. Since there is a contribution limit of $16,500 to a 401(k), older workers with large accounts were not able to make up their losses as easily through contributions. ‘
But all in all, account balances are improving. This is great news, but I must beg to differ with the Wall Street Journal headline: this should not be a surprise. This is simply the ebb and flow of the stock market. What goes down must come up and vice versa, so the best bet is to stay put in your retirement account.
I might add, we here at NCPA also noticed the upswing in the market, which prompted me to address the pitfalls of suspending contributions to a retirement account (yes, a small percentage of people got the willies and started withholding contributions last fall). See the NCPA brief analysis on why the mattress is better for sleeping than for investing.
Happy saving!
Tags: 401(k), investing, mattress, retirement savings, stock market
2 Responses to “A “Surprise” is Really no Surprise”
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Helium
October 26th, 2009 at 6:56 am
It only goes to show that over the long run, a 401(k) is a good retirement investment … even with the ups and downs.
Good post, Pam.
I have seen the numbers, and it is true that older 401k holders have a harder time making there money back. However, it still seems to me that logic would dictate that if the older worker is depositing the maximum during the downturn, then since they are buying more shares at the low price….they would rebound faster.
Either way, it still pays to be in the market. Thanks for the article.