Are you better off than you were four years ago? It’s a popular question at election time, and many Americans say they are not. But before you decide, though, it may be worth taking a close look your 401(k) account.
Balances in company-sponsored retirement plans are up in all 50 states over the three years ending in 2011, according to a new report. The median gain was 25%, though results varied widely by state. In Mississippi, the typical gain was more than 80%, while balances in Arkansas grew by just 1%, according to the report by FutureAdvisor, an investment firm. The authors assert:
“It’s important to note that when looking at diverse economic conditions across all 50 states, the fact that balances at retirement accounts improved in all 50 states is a strong indication of strong upward momentum nationwide.”
Looking just at 401(k) plans, the study found that the median balance grew by 28% in this three-year period and that there was little movement in how states rank. Those with the highest and lowest balances in 2008 generally were the same as in 2011. The median balance by state ranged from $15,000 to $35,000.
Interestingly, red states (those that voted Republican in 2008) enjoyed slightly better gains than blue states (those that voted Democrat in 2008). Red states’ typical 401(k) balance rose 28%, vs. 25% for blue states. But blue states maintain a wide lead with a median balance of around $28,000, vs. just $22,000 for red states.
Of greater significance to the candidates is how eight swing states fared over this period. Generally, the swing states are wealthier than average and experienced typical retirement asset growth. But in Ohio, which may be the most important swing state, 401(k) balances grew by a below-average 16%.
These figures suggest that at least one economic indicator favors incumbents. But like all things in politics, it’s not that simple. Retirement assets are directly tied to the financial markets, which have been on a tear for the past four years. Stocks have doubled from the 2009 lows and are up 68% in President Obama’s time in office; bonds also have risen sharply.
One could easily conclude that ordinary savers, seeing just a 25% gain in their retirement accounts, didn’t benefit to the extent they might have. For hardship reasons, they may have taken early distributions. They may have retired at precisely the wrong moment and started drawing down assets from depressed accounts. They may have shifted into safer assets after the crisis and not enjoyed the rebound in prices.
Other studies have shown that those who held on to their stocks and kept putting money in their account each pay period long ago recovered their losses from the financial crisis market slide. Still, retirement account balances being up in every state is a good thing—just not as good as it might be.