According to the  report , a majority of individual retirement account holders are now seeing positive returns in their retirement accounts, a positive trend following nearly five years of dismal returns.

For the report, Vanguard looked at the historic returns of 401(k) and IRA investors for the five years that ended in December 2004. According to the survey, over 80% of participants in Vanguard defined contribution plans and 70% of investors in its IRAs made gains – or at least broke even – over the last five years. 401(k) investors saw a median gain of 4% over this time period, while IRA investors saw a median gain of 3.2%.

Also on a positive note, the study found a 12% rise in the average 401(k) balance since 2000, up to $65,216 at the end of 2004; a 13% increase in the average IRA balance was also seen, up to $52,627.

Overall, 401(k) investors are younger and have less money than their IRA counterparts, the study shows. The median income for 401(k) investors – with an average age of 44 -was $84,000; the figure for IRA investors – with an average age of 50 – was $89,000.

Asset allocation was similar for both accounts, with a 70% -30% mix of stocks and bonds seen in both accounts.

According to the report, a difference between the two types of accounts is in terms of contributions – how new assets are being allocated. In 2004 the contribution allocation for the average DC plan investor was 71% of new money to equities and 29% to fixed income investments. During the same period the contribution allocation for the average IRA investor was 61% of new money to equities and 39% to fixed income.

Age Differences

Two interesting results emerge in an analysis of contributions by age, the Vanguard researchers found. First, in 2004 DC plan investors in their 20s and early 30s were more likely to adopt a more conservative contribution allocation than IRA investors of a similar age.

A number of factors could explain these differences. Vanguard said its DC plan investors have somewhat lower incomes.

align=”left”>Also, DC plan participants in their 20s and 30s may be less knowledgeable than IRA investors of the same age, and so may choose a more conservative asset allocation. In addition, DC participants younger than 25 are more than twice as likely to be using the plan default fund, which is typically a fixed income fund, the report said.

align=”left”>At the other end of the age spectrum, during that same time period older IRA investors in their 50s and 60s were more likely to adopt a conservative allocation than DC plan investors of a similar age. Researchers said part of this is likely an age effect, with a much larger representation of 65-and-older investors in IRAs. Seventeen percent of Vanguard IRA investors are 65 or older, while only 3% of DC investors are, the report said.

align=”left”>Examining trading activity, 20% DC participants made a trade (exchange) during 2004, compared with only 12% of IRA investors. Trading in DC plans appears to be more sensitive to the market and economic cycle than trading in IRAs. The number of DC plan traders jumped almost 50% in 2004 – from 14% to 20% of participants. Meanwhile, the number of IRA traders grew by a much smaller amount – from 11% to 12% of IRA account holders.

align=”left”> The study focused on the returns of 2.6 million participants in its employer-sponsored plans, and 2.7 million investors in Vanguard’s mutual fund IRA program.