Saving More and Having Less for Retirement

Contributions are up, but account balances are trending down.


Some workers this year have managed to tuck away slightly more into their retirement accounts than last year, according to new analysis. But that doesn't mean tax-deferred account balances are increasing.

The average pretax amount employees contributed to retirement plans was $3,187 in the first half of 2008, up 1.4 percent from $3,142 in the first half of 2007, according to an analysis of Fidelity's 16,723 corporate defined contribution plans representing 11.5 million participants. But the typical account balance is over $5,000 lower than last year.

The average defined contribution plan balance was $64,000 at the end of June 2008, down 7.5 percent from $69,200 in June 2007 because of market impacts, Fidelity found. Almost every financial adviser will tell you that only long-term returns matter when it comes to retirement (unless you are retiring very soon). And averages don't always tell the whole story for individual employees. But saving more and having less in your account a year later still stings a little bit.

The picture is slightly rosier for participants who stuck with the same workplace savings plan in both the first half of 2008 and 2007. The average pretax contribution among continuous participants increased by 7 percent to $3,512 in the first half of 2008, up from $3,283 last year. Account balances for those employees were $71,500, down less than 1 percent from $72,000 at the end of June 2007, although still slightly in the red.

Of course, the big winner is Fidelity, which boasts managed assets of more than $1.5 trillion as of June 30 and collects fees on your retirement account regardless of how the market performs. Perhaps this is one of the reasons the Urban Institute predicts that personal financial advisers will be among the fastest-growing jobs for aging baby boomers.