401(k) savers gain ground, but still come up short

If you're like most Americans, the financial meltdown of 2008 took a big bite out of your retirement savings. But don't give up on that 401(k) account just yet.

It turns out that people who stuck with their company-sponsored retirement savings plan last year saw average gains of 32 percent, according to a study by the Employee Benefit Research Institute and the Investment Company Institute.

Some 4 million so-called "consistent participants" tracked by the study closed out last year with an average account balance of $109,723 – up from $83,161 a year earlier. Since most retirement savers still keep the bulk of their money in stocks, the survey found, the 23 percent gain in the Standard & Poor's 500 Index for 2009 helped make up for the 38 percent drop in stock prices in 2008. So far this year, the S&P 500 index is up 6 percent. (The 32 percent gain for 2009 included worker and employer contributions as well as investment gains.)

About 60 percent of working-age Americans have access to a 401(k) savings plan at work; of those, some 88 percent participate in these plans, which typically match employee savings and allow investments to grow tax-free.

But despite the high participation rates, the current level of savings still falls far short of providing for a decent retirement. Though the average 401(k) account posted an annual growth rate of 14.7 percent between 2003 and 2009, the median balance was just under $60,000 at the end of last year.

That means tens of millions of American workers will be woefully unprepared to pay for even the most basic expenses when they retire, according to Jack VenDerhei, research director at the Employee Benefit Research Institute.

"I'm not talking about luxury items," he said."I'm not talking about maintaining your standard of living. I'm talking about just basic expenses plus uninsured medical costs. About 50 percent of households are falling short."

The recession hasn't helped. Tough times have forced more savers to tap into that nest egg. Some 21 percent of those whose plan offered loan options had dipped into savings as of the end of 2009 – up from 18 percent the year before.