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getattachment-2Some interesting stats emerged from Hewitt’s latest report on 401(k) savings and investing habits of more than 2.7 million employees. Mostly, the report shows our investing habits haven’t changed all that much. Why? Some say inertia (who knows what to do), while others say some employees continue to hold faith in slowly building their 401(k)s over time.

No matter what, “the losses workers have sustained are so extraordinary, they’ll need to be much more proactive about saving to build their nest egg back up to pre-recession levels,” says Pamela Hess, director of retirement research at Hewitt Associates.

Here are some of the study’s key findings:

  • The median rate of return in 2008 for 401(k) plans was a 28.3% loss—with the average 401(k) balance dropping from $79,600 in 2007 to $57,200 at the end of last year.
  • Only 11% of employees were able to break even or gain in their 401(k) portfolios. Forty-four percent of employees lost 30% or more of their savings in 2008.
  • 74% of employees participated in their 401(k) plan in 2008, which is consistent with previous years’ findings.
  • The average 401(k) contribution rate dropped only marginally, from 7.7% in 2007 to 7.4% in 2008. Just 5% stopped contributing to their 401(k) plan altogether in 2008.
  • There was a slight increase in the number of workers who made any trade in their 401(k) plan last year: 19.6% in 2008 vs. 18.7% in 2007.
  • Nine of the ten most active trading days were the day after a large downturn in the market, or days with an average return of -4%.
  • Employees’ average equity exposure dropped to just 59% in 2008—which is an all-time low since Hewitt began tracking it in 1997. Stable-value funds—which are considered less risky investments—experienced an 11% increase in asset allocation in 2008.
  • 18% of employees took a hardship withdrawal from their 401(k) plan in 2008. The number of employees taking out 401(k) loans (23.1%) in 2008 remained similar to levels in prior years.

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