Retirement plan balances reach record highs

I'm treating myself to a nice craft beer, and you should celebrate a little, too.

Due to a rising stock market and increased contributions from employees, the average balance in our 401(k) plans reached record highs at the end of last year.

That's what Fidelity Investments found when it analyzed the 12 million accounts that it manages.

The Boston-based mutual fund company's quarterly reports are one of the best benchmarks for judging the progress of your 401(k) retirement plan.

According to the report, the average 401(k) balance hit $77,300 at the end of 2012, up nearly 12% from $69,100 in 2011.

The fourth quarter balance — that's October through December — also beat out the third quarter's average of $75,900, the previous record.

This is the highest balance Fidelity has seen since it started tracking this data back in 2000.

Here's a nice graphic that shows how our retirement plans have recovered since the end of the recession and current average balances based on age.

Two-thirds of last year's increase can be attributed to a lively stock market, Fidelity says, while one-third was due to participant contributions.

It's a little disappointing that our 401(k) plans grew a little more slowly than the Standard & Poor's 500, which gained a little over 13% last year.

It seems like the Fidelity average balance should at least keep pace with the S&P 500.

But most savers have a diversified portfolio of stocks and bonds in their 401(k) plans to protect themselves from the volatile ups and downs of the stock market.

So while our balances might not go up as fast as the S&P 500 in a rising market, they won't fall as quickly when the latest Wall Street panic pushes share prices down.

We also have to give ourselves a pat on the back for upping our contributions last year, especially during a time when saving is pretty difficult.

For the 15th straight quarter, Fidelity says more savers increased than decreased contributions to their retirement programs.

On average, participants put 8% of their annual salaries into their 401(k) plans.

Add employer contributions to that, and the average savings rate jumps to 12%.

wad of cash in a nest

Learn the 10 secrets to successfully save for retirement. Saving for retirement can be surprisingly easy if you make just a few savvy decisions — and avoid just a few stupid mistakes. For example, don't be discouraged by how long it takes to reach your first $100,000. It's the hardest to save.

Just to make sure I wasn't misinterpreting these results, I called one of the country's leading experts on retirement savings.

"Yes, we had a good year," Alicia Munnell, director of the Center for Retirement Research at Boston College, told me.

"But I think the important thing to keep in mind is how low these balances are," she quickly added.

That $77,300 may seem like a lot, but it's not much to live on in retirement.

Everyone's goal should be to make the maximum contribution to their 401(k) plan every year.

For 2013, that's $17,500, or $23,000 if you're 50 or older.

With traditional pensions falling by the wayside, topping off your 401(k) is now one of the best things you can do to ensure your financial security in retirement .

Check out our 401(k) calculator401(k) to see how you can benefit from building your nest egg.

Believe me, I'm stuffing as much as I can afford in my 401(k), and if I max that out, my Roth IRA is next in line (I can dream, right?).

But record-high 401(k) balances are a win for us, and we should take a moment out to enjoy some good news.

This is a clear sign we're moving past the financial crisis and Great Recession.

Cheers!

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