NEW YORK (CNNfn) - The popular 401(k) retirement savings plans lost money for the first time in their 20-year history despite thousands of dollars in new contributions, a newspaper report said Monday.

The decline in 401(k) contributions has persisted into the first half of this year, influenced in part by a depressed economy and continued bearish sentiment in the markets, the New York Times reported.

The average account shrank to $41,919 in 2000 from $46,740 in 1999, the paper said, citing a report from Cerulli Associates.

The 401(k) is one of the most desirable retirement plans because it lets workers contribute more money -- $10,500 a year -- tax-deferred than any other long-term savings vehicle.

The plans also provide benefits to employees at smaller companies that do not have a traditional pension plan in place, the report noted, thereby encouraging savings and enabling workers to manage their money themselves.

But with the recent declines in 401(k) plans, employees are second-guessing their investment strategies, and wondering whether they made the right decisions in the first place, the report said.

Most pension plans have faced losses as the market stumbled, the Times said, but financial planners say traditional pension plans are able to balance risk and reward, thereby withstanding market shocks.


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