Psst! Your 401(k) Is Looking Better

You may have avoided opening your 401(k) statements while the markets were going off the deep end but if you took a look now, you might be pleasantly surprised. According to recent figures from Vanguard Group, the median 401(k) plan was up 7% from where it was two years ago, when the market was at its high. In fact, the Vanguard research shows that 60% of its 3.5 million 401(k) accounts were either flat or up this year compared to September, 2007.

The increase isn’t due to some mathematical magic. Although the Dow recently clawed its way back over 10,000, the stock market is still about 30% off its high-water mark two years ago. The secret to whether your account is better off depends on several factors: your age, your portfolio mix, and whether you continued to contribute to the account, of which the latter is probably the most important. By making additional contributions, 401(k) account holders bought more shares when the market was in the pits, which enhanced the positive effect of the recent rebound. Even without an employer match, which would have made results even better, employees who continued to add to their 401(k) accounts are more likely to have gained money than those who didn’t.

The fact that there’s more cash in your 401(k) account doesn’t necessarily mean that you’ve haven’t had investment losses, say retirement counselors, especially since both stocks and bonds took part in the market collapse. In light of the gut-wrenching market performance over the past year, however, having more money in your account is better than having less, which is what those who stopped their 401(k) contributions are probably stuck with.