When the market crashed in 2000 and again in 2008, some of the loudest cries of pain came from people shocked by the plunge in their retirement account balances.
But time seems to be working on healing those wounds.
Helped largely by the market's recent run-up, the average 401(k) account size in plans run by Fidelity Investments hit $77,300 as of Dec. 31.
That was a 12% increase in one year. About two-thirds of that came from market action, Fidelity said in a recent report. And it is the highest account balance since Fidelity began to track this data in Q4 2000.
Another giant in the retirement planning field sees similar bullishness in its 401(k) plans. Among plan members who fine-tuned their accounts in Q4, 81% took positive action, such as starting or increasing their savings rate, says Bank of America Merrill Lynch in a new report.
And new loans by plan members from their own accounts -- which tends to be a sign of financial stress -- were down 5% year over year.
Such data show that investors still believe in investing in the stock and bond markets for retirement, say advisers and strategists.
But few if any investors have forgotten recent history. "Because of the past 10 years, people remain cautious," said Ken Hevert, vice president of Retirement Products for Fidelity. "People are paying more attention to having the right asset mix and being diversified in their retirement plans."
Hitting New Highs
The fact that the stock market today in the form of the Dow industrials has regained its all-time high and the S&P 500 is nearing its peak has restored buy-and-hold strategists' confidence.
The next time the market melts down? "Start with an age-appropriate asset allocation and stick with it," Hevert said.
Kevin Crain, head of Institutional Retirement & Benefit Services for Bank of America Merrill Lynch, said: "If you continued to contribute or contributed more through the low of 2009, you were buying a lot more shares with each dollar than at the market high. That's dollar-cost averaging. Now you have the benefit of compounding."
Any matching contributions from companies also helped.
Making an investment plan and sticking with it remains a key to success. For people who don't want to figure out the best investments for their plan, target date mutual funds offer an answer. They're more widespread than a decade ago. So are managed accounts, in which you turn over the keys to your portfolio to a professional manager.
"Look at whether your plan is on track at least annually, but not weekly or monthly," Crain said. "If the market has shifted your target asset allocation, rebalance."
Of those who've been investing for at least the past 13 years, the best off are probably those who were blissfully unaware of the period's two devastating bear markets and those doggedly committed to staying the course.
"If you stayed in the market, the 2008-09 decline turns out to be a once-in-a-generation buying opportunity," said Joe Heider, regional managing principal for Rehmann Financial, based in Lansing, Mich. "And if you got out, you probably did not get back in in time to get the full benefit of the rally."
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.