US 401(k) retirement plans lost $72bn (£50.2bn) in 2000, according to a new report from Cerulli Associates.
In the report, Cerulli claim that for the first time ever, 401(k) plan assets shrank, with the $72bn loss leaving assets down to $1.766tr (£1.231tr). Cerulli attribute this to the decline in equity markets, which saw the value of many retirement plans falling.
In 2000, the average 401(k) balance declined to $41,919, from $46,740 in 1999. According to the Boston based research firm, there is evidence that growth in the 401(k) market is flattening as new plan growth slows and participation levels peak.
At the end of 2000, there were 327,364 plans serving 42.1 million 401(k) participants. The take up rate of new plans fell to about 8% per annum in 2000 from 15% per annum in the mid-1990s.
Net new flows into 401(k) plans are projected to remain flat at around $40bn (£27.9bn) between now and 2006. As the workforce begins to age, distributions are growing at a faster pace than contributions, contributing to the flattening of net flows. In 2000, for every dollar contributed to a 401(k) plan, Cerulli estimates that 74 cents were distributed to retirees and job changers. Cerulli believes that this will increase to 83 cents by 2006.
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