For much of this year, Melissa Roukous couldn't bear to read her 401(k) statement. The stock market collapse of 2008 drained more than 35 percent from her retirement account and steep market declines earlier this year gave her little reason for optimism.
"For a while, I felt hopeless about my future," said the marketing executive from Boca Raton, Fla.
But, with the stock market recovering more than 3,400 points since bottoming out in March, Roukous, 39, said her fear of peeking at her 401(k) balance sheet has waned.
"I am so relieved that my balance is finally going back up," she said.
Her 401(k) is now slightly ahead of pre-bust levels. "The upturn in the market makes me feel more confident about my future," she said
The stock market's dramatic rise is not only making bankers and traders giddy. It's also putting a smile on the faces of millions of Americans whose retirement accounts were decimated in the wake of a fierce economic collapse .
About $2.7 trillion was lost in 401(k) and individual retirement accounts between September 2007 and May of 2009, according to the Urban Institute , a Washington-based independent research group.
That level of investment loss won't be recovered any time soon and economic uncertainty portends a difficult future for many 401(k) accounts, financial experts say.
But the major stock indexes have rebounded by 50 percent or more since early March, and the economy is showing tangible signs of stabilizing. And that is spelling relief for anyone who watched their 401(k) accounts falter.
The Employee Benefit Research Institute and the Investment Company Institute recently released a report showing that many investors' 401(k) account balances have risen above the levels recorded at the beginning of 2008
"You had millions of people nearing retirement who were in a panic," said Dennis Suckstorf, a financial planner with Financial Advantage in Columbia, Md. "Many of them still are, but a stabilizing stock market will ease some of those fears."
The Dow Jones Industrial Average, one of the most-watched markers of the financial world, closed above 10,000 points Wednesday, underscoring the stock market's recovery from last year's financial crisis.
Big Banks Recover
Even some of the recession's biggest losers are seeing gains. Goldman Sachs , among the investment banks that received a government bailout, closed Wednesday at $192.28 a share, after trading as low as $47.41 in the past year. And, this week, JP Morgan Chase, another once-reeling financial institution, reported $3.6 billion in profit for the third quarter.
All of the bullish economic news has been good news for 401(k) accounts, analysts say.
"People are a little less afraid to peek at their statements now," said Luke Vandermillen, vice president of retirement and investor services at Principal Financial Group Inc., a large 401(k) provider. "After a very difficult climate for retirement accounts, the recent economic news is certainly much better."
Nearly 73 million Americans, or a little less than 50 percent of the working population, have a 401(k), according to the Society of Professional Asset-Managers and Record Keepers. Americans pour more than $200 billion into 401(k) accounts each year, the group said.
The economic meltdown forced an increasing number of people to slow or halt contributions to their 401(k) accounts. From mid-2008 through the first quarter of 2009, more employees reduced their contributions than increased them, according to Fidelity Investments, which manages 11.2 million 401(k) accounts.
But, despite the economic meltdown that saw many retirement accounts severely wounded, participation in 401(k) plans held steady in 2008, even as the average account lost 28 percent of its value, according to Hewitt Associates , which tracks retirement plans.
More people moved their money into cash or bonds for safety and, overall, the contribution rate dropped less than half a percentage point, the company said.
And, in the first half of 2009, when stocks hit their worst levels and then pivoted higher, only 9 percent of investors made trades in their 401(k) accounts, according to Vanguard.
"You saw people essentially still keeping faith in their 401(k), even in a terrible market," said Vandermillen of Principal Financial Group.
Retirement Savings Plan and Strategy
That's a strategy followed by Chris Barger. The 27-year old from Harrisburg, Pa., said she panicked as she watched her 401(k) drop by more than 30 percent late last year and in early 2009. Like many people watching the markets tank, she worried that it was time to get out of the stock market all together and seek safer investments.
"When it was bad, it was down 36 percent," the telecommunications systems performance engineer said. But "I stuck with my 401(k) because I'm only 27 and I knew the market would turn around."
Barger said her 401(k) has gained back about 10 percent of its value in the past six months.
Tax-deferred 401(k) plans, and others like it, such as the 403(b) and the IRA, have long been popular ways to plan and invest for retirement, particularly plans that allow employers to match all or part of contributions.
The best way to regain some of that lost value is to continue to contribute and keep money in the stock market to take advantage of gains that are bound to come with economic recovery, financial planners say. Historically, the S&P 500 returns about 9.7 percent annually.
But economists warn that a rising Dow does not mean the economy's problems are over, or that 401(k)'s are going to fully recover anytime soon. The current bull market could even stall the rally if investor's cash in their gains, economists say. And, even if the recession is technically nearing an end, 15 million people are still unemployed.
"It's important to remember that we still have a ways to go here," said Investment advisor Jeff Hoachlander of St Louis-based investment firm Edward Jones.
Dolores Holmes, 58, who hopes to retire someday from running her bed and breakfast in Lambertville, N.J., saw her retirement savings drop almost 80 percent, and still has a long way to go to get back to where she was.
"There was a big increase, this big last statement which was very positive," Holmes said. "I'm just holding my breath and hope it keeps on going up."