Employees get back into their 401(k) plans

Employees are gradually returning to the idea of feeding their 401(k)s. In each of the previous three quarters, Fidelity reported that six percent of its 11.2 million plan participants cut their 401(k) contributions, but in the three months ending June 30, the tide turned. During that period, 4.7 percent boosted their contributions and three percent decreased them. Most people left their contributions unchanged, so they continued to buy securities while they were on a fire sale.

Unfortunately those who stopped adding to their 401(k) lost out on the 15 percent upswing in the S&P index in the second quarter, but the rally could continue since economists are now predicting the end of the recession. Fidelity reports that the average individual account balance rose 13.5 percent in the second quarter to $53,900. This was primarily due to stock price increases, but additional contributions were also a factor.