The Standard & Poor's 500 stock index was up nearly 7 percent for the year through Wednesday. So it's likely that account balances will climb farther when first-quarter numbers are in for the 12 million 401(k) accounts that Fidelity administers.
In the final three months of last year, 401(k) balances rose a modest 2 percent. The average balance was $75,900 at the end of the third quarter.
The S&P 500 and a broad U.S. bond market index finished the fourth quarter largely unchanged, although there was plenty of drama. Stocks tumbled following President Barack Obama's re-election as it appeared talks to avert the ''fiscal cliff'' would become fiercely partisan. But the market recovered as negotiators slowly made progress, ultimately reaching a Jan. 1 deal to avoid severe tax increases and delay spending cuts.
For the full year, the S&P 500 posted a return of 16 percent and bonds were up about 4 percent as corporate profits improved and the economy continued to recover from the Great Recession.
Fidelity estimates that about two-thirds of last year's increase in the average 401(k) balance was attributed to investment returns and one-third to worker contributions and employer matches.
Over the past 10 years, those two components have played a roughly equal role in boosting account balances, with 53 percent attributed to contributions and 47 percent to market gains.
''You really need to contribute to your account, because those contributions have an equal weighting to the market appreciation over the long term,'' says Beth McHugh, vice president of market insights at Boston-based Fidelity.
Investment earnings and contributions can grow tax-free in an employer-sponsored 401(k) account, which is a key reason why they're a popular way to save for retirement.
The amounts that investors have saved through their 401(k)s vary widely depending on a participant's age. Fidelity said the average year-end balances were $143,300 for participants 55 and older and not yet retired; $120,400 for baby boomers born from 1946 to 1964; $59,100 for Generation Xers born from 1965 to 1978; and $15,400 for those in Generation Y, born from 1979 to 1991.
Overall, the average employee contribution in Fidelity-administered 401(k) plans has remained steady at around 8 percent of annual pay for the past four years. Factoring in employer matches, the total savings rate rises to 12 percent. In the latest quarter, 5.8 percent of participants increased the amount of their 401(k) paycheck deductions, while just 3.1 percent decreased the amount.
The number of employees increasing their deductions has exceeded the number decreasing them in each quarter since early 2009. That indicates employees feel more comfortable about their financial situations than during the recession, although wage growth has been slow and unemployment remains high.
Yet workers who have stayed in the market long term have found it difficult to rely solely on investment gains to build up 401(k) savings. The S&P 500 remains about 3 percent below its historic peak in October 2007.