Why Your 401(k) Still Hasn't Recovered

Retirement account balances are still below their 2007 peaks.

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401(k) expenses. Retirement savers continue to pay fees on their retirement investments, even in years in which they lose value. Investment and record-keeping fees are paid by most 401(k) participants. There are also redemption fees or surrender charges imposed for changing and selling investments.

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Early withdrawals. Financial hardship caused some workers to dip into their retirement accounts early. Employees are generally allowed to take a 401(k) loan of up to 50 percent of the vested account balance or $50,000—whichever is less. But the loan must be paid back with interest. Some 18 percent of Vanguard 401(k) participants had a loan outstanding at the end of 2009. Another 2 percent of 401(k) participants took hardship withdrawals. Workers who take 401(k) withdrawals before age 59 1/2 must pay a 10 percent early withdrawal penalty and regular income tax on the amount withdrawn. 401(k) participants are often not allowed to contribute to their 401(k) again for six months after a hardship withdrawal, which makes replacing the savings even more difficult.