60% of All Vanguard Accounts and 71% of Target-Date Funds Have Recovered to 2007 Levels
ABC News -- Another major provider of 401(k) accounts says the typical retirement saver now has more money in their account than they did before the stock market began tumbling two years ago. The Vanguard Group Inc. said Wednesday that 60 percent of participants who continued to contribute and stayed invested have more money in their accounts than they had in September 2007 — before the market decline. That means 40 percent of continuous participants have lower balances, although Vanguard said most of them are less than 20 percent below their earlier peak value.
From Vanguard's press release:
The study looked at Vanguard participant balances between September 2007 and September 2009, a period during which the market peaked in October 2007 and declined dramatically in 2008 and early 2009. At Vanguard as of September 2009, 60% of continuous participants (those with a balance in their plan over that two-year period) had the same or a higher account balance than they had at the stock market’s October 2007 peak. The balances of 40% of continuous participants were lower, although most of them had balances that are less than 20% below their earlier peak value.
The study also found that 71% of pure Vanguard target-date fund investors (those investing their entire plan account in a target-date fund) saw their account balances return to or exceed the level of two years ago. The median pure target-date investor’s account increased more than 80% during the period. These positive outcomes occurred regardless of the stated retirement year of the fund.
“The main reason for the recovery in 401(k) balances is ongoing contributions. Both investment returns and contributions jointly determine retirement savings,” said Stephen P. Utkus, head of the Vanguard Center for Retirement Research. “Growth in one of those factors can offset losses in another over a given period. Our evidence suggests that ongoing contributions plus improvement over time in the capital markets may restore many more of these individuals to their pre-October 2007 wealth levels, perhaps more rapidly than previously anticipated.”
HT: Lyle Meier