Fidelity Investments, the nation's largest 401(k) administrator, said on Tuesday that the average balance among its nearly 12 million accountholders was $74,600 at the end of March. That's up from $69,100 at the end of 2011.
Fidelity attributed about 80 percent of the increase to investment performance. Stocks rallied nearly 13 percent, the market's best first-quarter performance since 1998. A broad bond market index rose just 0.3 percent.
The rest of the average 401(k) balance increase was the result of increased savings by workers as well as matching contributions from their employers.
Fidelity's 401(k) participants set aside an average $5,810 through paycheck deductions for the 12-month period ended March 31, and employers kicked an additional $3,360. Both numbers are slightly higher than they were a year ago.
The average employee contribution has remained steady at around 8 percent of annual pay for the past three years, says Beth McHugh, vice president of market insights at Boston-based Fidelity.
But saving rates are beginning to tick upward. Nearly 10 percent of Fidelity 401(k) participants increased their contribution rate in the first quarter, while roughly 4 percent decreased it.
Investment earnings and contributions can grow tax-free in an employer-sponsored 401(k) account, which is a key reason why they're a popular way to save for retirement.
The rise in 401(k) account balances comes as a relief after the average remained largely unchanged in 2011. Although worker and employer contributions increased last year, those gains were offset by factors including investment performance, and mutual fund fees. Account balances are now at their highest level since Fidelity began tracking the data in 1998.
And there was plenty of ground to make up. The stock meltdown in 2008 sent the average account balance down to $46,200 by the time the market hit bottom in March 2009. Since then the average balance has risen 10 of 12 quarters, growing a cumulative 61 percent.
Typically, about two-thirds of annual increases in 401(k) account balances are the result of workers' added contributions and company matches, with the final third resulting from investment returns.
Yet it's been a tough battle in recent years. Workers who have stayed in the market haven't been able to rely on investment gains to build up savings. That's because stocks are nearly 11 percent below their historic peak in October 2007. Instead, workers have had to rely on building their balances largely through ongoing contributions.
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