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    Patience pays off for older investors

    Those saving for retirement more than recoup losses from market plunge

    Wayne and Lillian Graham, with their son, Eddie, in the kitchen, have recovered losses in their retirement fund.
    Jim Davis/Globe Staff
    Wayne and Lillian Graham, with their son, Eddie, in the kitchen, have recovered losses in their retirement fund.

    It was a nightly debate for countless couples such as Lillian and Wayne Graham in late 2008 and early 2009. Should they hold on to the stocks meant to pay for their retirement years or bail out of a crashing market?

    Wayne, now 59, wanted to cut their losses. Lillian, 55, persuaded him to hang in there.

    Four years later, the Topsfield couple are glad she did.


    “We stayed in the market, and we’ve recovered everything we lost and then some,” said Lillian, a visiting nurse.

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    As the stock market soars to record heights four years after a breathtaking plunge drained 401(k) accounts, retirement savers who stuck it out during the darkest days of the recession are being rewarded for their patience.

    The lesson is that retirement planning requires a long-range view, said Alicia H. Munnell, director of the Center for Retirement Research at Boston College. “You can’t make too much of the blips,” Munnell said.

    Fidelity Investments — the nation’s largest administrator of 401(k) plans, with roughly 12 million accounts — recently reported that the average balance in client accounts hit a record high of $80,900 at the end of March, a 75 percent increase since early 2009.

    Accounts held by people 55 and older, like the Grahams, have fared even better. The average balance for those pre-retirees has nearly doubled, to $255,000.


    Meanwhile, investors over 55 who abandoned equities altogether have seen their 401(k) accounts grow by just 26 percent during the same period.

    “I think what’s really important to note is that when you look at the overall balance increase over the last year, two-thirds has been due to gains in equities,” said Beth McHugh, vice president of market insights at Fidelity.

    When the stock market began its decline five years ago, the blow to 401(k) accounts was hard and fast. Almost every day brought more bad news, until the Standard & Poor’s 500 stock index bottomed out on March 9, 2009, losing about 53 percent of its value in less than 10 months.

    Seemingly overnight, many investors lost half their life savings. It was a scary time, especially for investors who had lived through another recent, gut-wrenching investment experience. The economic decline of 2001 had helped drive the stock market down more than 40 percent, losses that took more than four years to recover.

    As he watched the market sink again during the latest recession, 48-year-old Michael Goldstein of Sherborn asked his wife a question: “Do you want to know how much we’re down?” he said, recalling the conversation. “I mean, we were down six figures. She said no. So she slept fine but I, realizing I was making decisions for both of us, felt this extra weight.”


    The couple’s savings were in good hands — Goldstein chairs the Finance Department at Babson College — but even he was unnerved. Ultimately, Goldstein maintained a stock-heavy portfolio in their retirement account and said he is happy with the decision.

    ‘We were down six figures . . . I, realizing I was making decisions for both of us, felt this extra weight.’

    The experience of Goldstein and others who held on to their stocks is a reminder that “it’s really about time in the market, not timing of the market,” said Sarah Holden, senior director of retirement and investor research at the Investment Company Institute, a national association of investment companies based in Washington. For the most part, Holden said, the collapse “has not translated into leaving the stock market, just to investing in a more diversified way.”

    In a report published in April, the institute found that by 2011 only a quarter of people in their 50s were allocating at least 80 percent of their 401(k) assets to equities. A decade earlier, almost half of investors in that age group were putting 80 cents of every 401(k) dollar into the market.

    Younger investors, however, appear increasingly willing to bet their retirements on the resurgent stock market. In an Investment Company Institute survey conducted last year, 26 percent of investors under 35 said they were willing to take “above average” or “substantial” risk with their savings, a strategy that typically translates into buying stock. The risk measure remained lower than it was in 2001 but was 8 percentage points higher than it had been just one year earlier.

    The market has only gotten stronger in 2013. The Dow Jones industrial average has soared 19 percent this year. The broader Standard and Poor’s 500 index has climbed 17 percent. Both stock market benchmarks have earned a total return of 126 percent since the end of March 2009.

    The rebound is a good sign, but investors should not take a victory lap, cautioned Munnell. While the percentage gains are impressive, the dollar figures are not, she said.

    “The key message here is we have minuscule amounts of money in these 401(k) plans,” Munnell said. “Yes, they’re higher than in recent years, but they’re still pathetically small. So the average is $80,000 — how long is that going to last you?”

    Improved market performance was not enough for many who were on the threshold of retirement. They have had to live a more threadbare retirement than anticipated or delay retiring.

    Even for those who recouped their losses, Munnell recommends working as long as possible. “Stay in the labor force,’’ she said. “That’s the best thing you can do.”

    Lillian Graham said she plans to work at least 15 more years, until she is 70, and added that her husband will probably work up to the same age, no easy task in his physically demanding job as a welder.

    Graham said she is happy to see their 401(k) account filling back up, but it will take sustained growth to restore her confidence in their retirement savings.

    “We’d like to redo the kitchen, but we’re hesitant to make such a big expense,” Graham said. “We’re still holding back a bit.”

    Callum Borchers can be reached at Follow him on Twitter