Longtime 401(k) Savers Sit on Six-Figure Nest Eggs

Persistence pays.

The average nest egg for people who have been in 401(k) plans for at least six years topped $100,000 for the first time, according to a survey released Thursday.

Their account balances averaged $102,014, up 9.6% from $93,085 in last year’s survey.

“The discipline of saving pays off,” said Sarah Holden, senior economist with the Investment Company Institute, a mutual fund trade group that sponsored the study with the Employee Benefits Research Institute. “This data demonstrates the power of persistence.”

The average account balance for all 401(k) participants -- including people who have been saving just a year -- was $58,328, up 2.5% from $56,878 in 2004.

The study, which is based on balances through 2005, considers anyone who has kept a 401(k) account for at least six years to be a long-term participant.

For long-term participants, account balances have swollen by 50.5% since 1999, when their holdings averaged $67,785.

The boost reflects both added savings and investment returns. Investors lost ground during the bear market of 2000-02, but those who kept salting away money reaped rewards when stocks rebounded. Stock investments account for about two-thirds of all retirement plan assets.

The annual study tracks changes in account balances and investment habits for about 17 million workers, or about one-third of all 401(k) participants.

Jack VanDerhei, an Employee Benefits Research Institute fellow who co-authored the study, said investors appeared to be heeding advice to diversify their portfolios and to avoid holding too much of their own company’s stock.

Assets in balanced funds -- which invest in a mix of stocks, bonds and cash -- have soared, particularly among new participants. About 41% of newly hired workers put the bulk of their assets in balanced funds versus just 8% in 1998.

In addition, 401(k) account holders overall have 13% of their assets in their own company’s stock, down from 19% in 1999.

Workers can contribute as much as $15,000 to their 401(k) accounts in 2006. Those 50 and older can make so-called catch-up contributions of an additional $5,000. From 2007 on, contribution limits will increase by $500 annually in both categories.

For people in their 20s who have saved for at least six years, the average 401(k) balance was $24,169, up from $19,781 in 2004.

For people in their 60s who have saved for at least six years, 401(k) accounts averaged $140,951, up from $137,407.