My colleagues at Money Management Executive (my moles within the investment management industry) gave me a lead this week on a Denver Post report that finds young employee-investors, having watched their parents and grandparents suffer from recent market declines, are much more risk-averse than their age might suggest – an attitude that is affecting their retirement planning.

The paper features one account from a 23-year-old, whose mother lost 40% of her portfolio in the recent meltdown. As a result, he says he no longer believes in buy-and-hold investing. “That sealed the deal for me in not believing in a long-term focus,” he told the Post.

And while the opportunity to earn compound interest and save now while they have some three or four decades til retirement, it’s hard to argue with the youngsters, when faced with new data from EBRI that show the average 401(k) balance is back at the level it was in 2004 – wiping out the past five years of investing.

The median 401(k) balance was $26,578 in June, and the median IRA balance was $28,955, the organization finds. DC plan balances declined 16.4% from the end of 2007 through June, and IRA balanced declined 15%.

And of course, the higher a participant’s balance, the greater their losses during the recession. While the average plan dropped 16.4% in the 18 months since the end of 2007, for families with more than $100,000 in income, the losses averaged 22%, and those earning the top 10% saw their balances drop 28%.

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