401(k) Recovery Winners and Losers

401(k) account balances have rebounded significantly since last year. Fidelity 401(k) accounts held an average of $66,900 at the end of first quarter of 2010, up 41 percent from a year earlier. That amount, however, is still below the $69,200 nest egg Fidelity 401(k) participants had in 2007.

Some groups of people have recovered from stock market losses far faster than others. While most young investors and consistent savers are already ahead of where they were 2 years ago, retirees and workers with large account balances have had difficulty recouping their often more significant losses. Here’s a look at which retirement savers have come out ahead and behind over the past 2 years.

[See 21 Ways to Cut Expenses in Retirement.]

Winners:

Young people. A whopping 78 percent of relatively young workers between the ages of 25 and 34 have seen their 401(k) balances climb since 2007. The median account balance for this age group jumped 67 percent between September 2007 and December 2009, according to an analysis of Vanguard 401(k) plans. New contributions make up a significant portion of young worker’s 401(k) balances, which has allowed them to recoup losses faster. In contrast, slightly older mid-career workers between ages 35 and 44 saw their median account balance rise by a much more modest 14 percent. And those age 45 to 54 have only seen their nest egg grow a median of 6 percent over more than 2 years.

New investors. Those who first invested in the stock market at rock bottom prices in 2008 have seen their investments soar. Employees who have only been saving in their current workplace retirement account for 2 to 3 years generally watched their median account balance skyrocket an astonishing 170 percent since September 2007, Vanguard found. Both new saving and climbing investment returns contributed to the uptick.

[See 7 401(k) Mistakes You’re Probably Making.]

Consistent savers. Workers who continued to save and invest in a retirement account throughout the stock market’s wild ride came out significantly ahead of those who abandoned their retirement accounts. Much of the 401(k) recovery has been fueled by new contributions. Some 7.5 percent of Fidelity 401(k) participants and about 9 percent of Bank of America Merrill Lynch retirement account holders increased their 401(k) deposits in the first quarter. Both Fidelity and Bank of America Merrill Lynch found that more people boosted their retirement savings than cut back on 401(k) contributions. Bank of America also experienced increasing use of automatic enrollment (9 percent) and automatic increases in contributions (13 percent) which contributed to the uptick in saving.

Losers:

Retirees. Retirees had the most difficulty recovering from the recession. The median account balance for Vanguard 401(k) account holders age 65 and older is still 5 percent below where it was in September 2007. Without new 401(k) contributions from working it takes significantly longer to recoup losses. The lower account balance may also reflect withdrawals for living expenses.

Life-long savers. Retirement savers who were diligent enough to accumulate a nest egg of over $250,000 have taken the longest to recover. Account balances are still 2 percent below where they were in September 2007, Vanguard found. Less than half (46 percent) of workers with a quarter of a million dollars or more in a retirement account have a higher account balance than they did 2 years ago, Vanguard found.

[See The 100 Best Mutual Funds for the Long Term.]

Long-tenured workers. Only slightly more than half (56 percent) of workers with 10 or more years on the job have more in their 401(k) now than they did in September 2007. The median account balance among workers who have remained with the same employer for over a decade is up only 3 percent since September 2007, Vanguard found. High income workers have also experienced little net growth. Only 58 percent of workers earning 6 figure salaries saw their retirement account balance grow since 2007. The median account balance among those earning over $100,000 annually is just 5 percent higher than it was in 2007.

Tell us, has your 401(k) recovered?