Retirement Savings Lose $2 Trillion in 15 Months

Other academics and analysts say 401(k) plans allow employees to take control of their retirements.

Jerry Bramlett, president of consulting firm BenefitStreet, said 401(k) participants should resist the urge to pull money out of stocks because that would lock in their losses.

"Markets do go up and down, and 401(k) participants must try to remember to think long-term," he said.

Many investors have been buying low-yield Treasury bills in recent months because they are considered less volatile. Bramlett cautioned against that because it would leave them vulnerable to inflation.

That said, 401(k) participants should evaluate their portfolios to make sure their money is spread among stock and fixed-income investments. They should also make sure they do not have too much of their own company's stock.

Public pensions also have suffered. The assets held by state and local governments' pension plans declined by more than $300 billion between the second quarter of 2007 and the second quarter of 2008, according to the Federal Reserve. About 60 percent of public pension funds are invested in stocks, 30 percent in domestic fixed-income securities, 5 percent in real estate, and the remaining 5 percent in other products.

Miller called the findings "very cataclysmic for middle-class families."

Several analysts who testified at the hearing said the most vulnerable workers are those nearing retirement, who have large balances in their retirement plans that are now shrinking. Tighter household budgets are also crimping workers' retirement savings. According to a survey released yesterday by AARP, 20 percent of baby boomers stopped contributing to their retirement plans in the past year because they have had trouble making ends meet.

Already, more and more workers are delaying retirement, a trend that analysts and economists expect to accelerate because of the distressed economy. The people age 55 and older who work full time grew from about 22 percent in 1990 to nearly 30 percent in 2007, according to the Bureau of Labor Statistics.

By 2016, the bureau predicts, the number of workers age 65 and over will soar by more than 80 percent, and they will make up 6.1 percent of the labor force. In 2006, they accounted for 3.6 percent of active workers.