401(k) investors: Hit hard in '08, doing better now

NEW YORK (CNNMoney.com) -- Among the swell of bad news that occurred courtesy of the financial crisis last fall is that 401(k) investors got slammed. And a new report released Tuesday quantifies just how hard.

Taking into account both contributions and investment return, the average 401(k) balance among people who had their accounts for five years fell 24.3% in 2008, according to the Employee Benefit Research Institute and the Investment Company Institute. That brought the average balance down to $86,513 from $114,337 at the end of 2007. (Please see correction below.)

Among all 401(k) participants, the average balance fell 30.5% to $45,519, from $65,454.

Thankfully, that's not the end of the story. Many investors have recouped a lot of what they lost. There are two reasons: the S&P 500 has been on a fairly steady upward march in the past several months; and most participants have kept making contributions to their 401(k)s despite the crisis.

The crisis last fall hurt all 401(k) participants, but it hurt them each a little differently. That's because how well a 401(k) investor does depends on a host of factors: age, tenure, years as a 401(k) participant, starting balance and size of contributions.

For instance, the worst-hit group in 2008 were midcareer workers in their 40s who had accumulated a nice stash before the meltdown.

"Mid-career workers with larger balances suffered larger percentage losses overall last year, because the share of equities in their account allocation was relatively high and their ongoing contributions were small relative to their existing balances," EBRI research director Jack Vanderhei said in a statement.

That group's average balance fell more than 26% compared to a nearly 19% drop among 401(k) participants in their 20s who had contributed to their plans for 5 years.

And, regardless of their ages, the average balance for participants who saved consistently over five years grew to $86,513 -- or 42% more than at the end of 2003.

The report focuses strictly on calendar year 2008. So it doesn't account for the fact that the financial crisis continued well into 2009.

That meant 401(k) investors got hit even harder in the early months of this year. Case in point: stocks hit a 12-year low in March.

But since then, many have not only been able to restore their balances to where they were at the start of 2008, they have done far better. For example, the average account balance rose nearly 14% for those workers between the ages of 35 and 44 who have worked at the same company between five and nine years.

Of course, not everyone is in the black. The groups of 401(k) participants who are still treading in negative territory are workers between the ages of 45 and 64 who have logged at least 10 years with their employers.

The worst in this category are those 55 to 64 with more than 20 years' tenure. Their average account balance is still down 7.5% from the start of 2008.

By contrast, the S&P 500 is still down about 28% from where it was. That may not feel like a huge victory for those nearing retirement. But it is a powerful reminder that saving consistently can help cushion the blow of a dreadful market.

Correction: The original version of this article incorrectly stated how much the average 401(k) balance for all participants fell in 2008.