December 2007

WORKERS WHO SAVE IN 401K ACCOUNTS ARE BUILDING HEALTHY NEST EGGS

The news is encouraging for those who participate consistently in their employers’ 401k plans, according to a new study of growth in 401k assets.

Workers who made regular contributions to 401k plans from 1999 through 2006 and invested in a diversified way saw average annual growth of nearly 9% in their account balances, said the Employee Benefit Research Institute, an independent non-profit organization.

Workers who save regularly in their 401k accounts have been rewarded since 1999.

The average balances in those workers’ 401k accounts increased to $121,202 by the end of last year, up from $67,760 at the end of 1999.

This healthy increase was noteworthy because the period studied included one of the worst three year bear markets on record, EBRI noted.

The study noted that 401k plans are growing rapidly into a major source of retirement wealth for American workers. Some 50 million workers participated in them at the end of last year and had $2.7 trillion in their accounts.

The Institute said that those who participate in plans through regular contributions accumulate the most wealth.

Another positive finding was that most 401k assets are in the stock market. About two-thirds of the average account is in stocks and one-third in fixed income investments.

Even better, the percentage allocated to an employer’s own stock fell during the period under study, to just 11% of account balances by the end of 2006.

Investment experts often warn that it is dangerous to concentrate too much in one company’s stock.

Finally, the study found that borrowing against 401k accounts is fairly modest. Only 18% of participants had loans last year and the loans averaged only about 12% of account balances.

Published by Finlan Asset Management, Inc. All rights reserved. Information has been obtained from sources believed to be reliable, but its accuracy and completeness, and the opinions based thereon, are not guaranteed and no responsibility is assumed for errors and omissions. Nothing in this publication should be deemed as individual investment advice. Consult your personal financial adviser and investment prospectus before making an investment decision. Any performance data published herein are not predictive of future performance. Investors should always be aware that past performance has not been shown to predict the future. If in doubt about the tax or legal consequences of an investment decision it is best to consult a qualified expert.

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