When employees open their second-quarter 401(k) statements this month, they might actually have reason to smile, according to CNN/Money.

The site notes that the major stock indexes "had a solid run" in the first half of the year, but especially in the second quarter. Exhibit A: the S&P 500, which rose 14.9 percent for the quarter, and 10.8 percent year to date through June 30.

T. Rowe Price, which runs 401(k) plans for 1.3 million participants, told CNN/Money that as a result, it estimates the average investor in its plans will see an 11 percent return for the second quarter and a 7 percent return for the first half.

Those projections are based on a typical T. Rowe Price portfolio, which has 70 percent of assets in equities and 30 percent in fixed income products, particularly stable value funds and money market accounts. The estimated returns do not count contributions.

Translated to dollars and cents, T. Rowe Price estimates the average 401(k) balance will have grown 11.1 percent to about $40,000 compared with $36,000 at the end of 2002.

David Wray, president of the Profit Sharing/401(k) Council of America, warned it's important to keep that T. Rowe Price is talking about the average balance, which can skew high because of a small percentage of participants with very fat nest eggs. "Averages are not representative," Wray observed.

The median balance is typically much lower, Wray said. And less than half of 401(k) participants meet or exceed the median.

Wray estimates, for instance, that the median balance among 401(k) participants was about $15,000 at the end of 2002, and the typical allocation in a portfolio was 62 percent equities, 38 percent fixed income, again with a high concentration in stable value funds.

Other 401(k) plan providers, including Fidelity, Principal and Vanguard, told CNN/Money that either they didn't have the data readily available or don't release such numbers publicly.

Links

• CNN/Money article