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More investing in retirement and it's paying off

| Thursday, Sept. 29, 2005

U.S. retirement accounts increased an average of 15 percent in 2004, the second straight year of gains, as 401(k) plan participants benefited from rising stocks.

The average nest egg of Americans who've participated in 401(k) plans since 1999 grew to $91,042 last year from $78,893 in 2003, according to a study published Wednesday by the Employee Benefit Research Institute and Investment Company Institute. Workers' savings have increased 36 percent in the past five years because of contributions and market gains beginning in 2002.

The study found increased use of lifestyle or lifecycle funds by workers of all ages. Those funds invest in a mix of stocks and bonds and become more conservative as participants grow older. Vanguard Group, T. Rowe Price Group Inc. and Fidelity Investments are among companies offering age-based funds.

Plan participants profited last year as the Standard & Poor's 500 Index, the benchmark U.S. stock index, had a total return of 11 percent. About 67 percent of participants' assets are in stocks, including equity mutual funds, the stock portion of balanced funds and company stock, the study showed.

Counting workers who enrolled in a 401(k) plan since 1999, the average account balance was $56,878 last year, up 10 percent from $51,569 in 2003, the study found. Account balances and participation levels of workers in their 20s are lower than for older workers, reducing the overall average, said the study's authors, Investment Company Institute economist Sarah Holden and Jack VanDerhei, a Temple University professor.

Workers in their 20s invested 16 percent of their assets in lifestyle funds, compared with 7.4 percent in 1998. Allocations by workers in their 40s increased to 16 percent from 10 percent, and by participants in their 60s to 16 percent from 12 percent.

The study is based on data collected from 40 percent of the 43 million U.S. workers who participated in 401(k) plans at the end of 2004.

The Employee Benefit Research Institute is a corporate-funded research organization whose members include investment-management companies. The Investment Company Institute is the trade association for the U.S. mutual fund industry.

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