After seeing stocks drop more than 50% in just over a year and a half, you may have thought it would take forever to see your retirement accounts get back to their former high levels. Even though the current rally has still left stocks far below where they were at the end of 2007, many investors have finally started to see green in their 401(k) accounts.

Throughout the financial crisis, the Employee Benefits Research Institute (EBRI) has released regular reports on the status of workers' balances in their 401(k) plans. As you'd expect, for a long time, the news was extremely grim. Recently, though, the EBRI has seen a big turnaround in the performance of retirement accounts -- to the point where many participants actually have higher balances than they did at the beginning of 2008.

Staying on course
The report divides workers into different categories based on how old they are and how long they've participated in their 401(k) plan. Back in March, the numbers were ugly, especially for those who had participated in their plans for a long time. Workers who had used their retirement plans for 10 years or more suffered average losses of 20% or more since the start of 2008, with older workers taking even larger hits.

Now, though, the tide has turned. Across the board, workers with less than 10 years of plan participation have seen their average balances turn positive since the beginning of 2008. Even those with the longest tenure in their plans have seen their average balances claw back to within 13% of their previous value.

What's going on?
Two things are contributing to the big comeback in 401(k) plan balances. First and most obviously, stocks have roared back with a vengeance. Many stocks that had posted losses between January 2008 and the March 2009 lows have now produced healthy gains:


Total Return Since Jan. 1, 2008

Return Jan. 1, 2008 to March 9, 2009




Qualcomm (NASDAQ:QCOM)






Ford Motor (NYSE:F)



Darden Restaurants (NYSE:DRI)



Bed Bath & Beyond (NASDAQ:BBBY)



Source: Capital IQ, a division of Standard and Poor's. As of Aug. 3.

Moreover, some stocks actually seemed to have risen despite all of the chaos in the markets, rising even as the market set new lows. Family Dollar (NYSE:FDO), for instance, has risen 67% since 2008 began. Big Lots is up 44%. Though many of these stocks have little weight in the overall S&P 500 index, they've done their part to help drag the overall market back toward the black.

Staying on course
Investment gains alone can't explain the comeback. After all, despite breaking the 1,000 level for the first time since November, the S&P 500 is still down almost a third from where it started 2008.

For many workers, ongoing contributions have clearly made a big impact in their recovery. Younger employees have seen account balances jump between 32% and 67%, depending on how long they've participated. And while older workers presumably have larger account balances for which new contributions won't make as big a difference, money invested at the extremely low prices we've seen throughout much of last fall and winter is now showing substantial gains -- at least on paper.

In fact, although EBRI's report doesn't provide contribution information, it's entirely possible that workers have increased their retirement savings. With the U.S. savings rate on the increase, reversing a downward trend that has gone on for years, it's clear that people are trying to take steps to make ends meet and provide for their financial future. It's likely that at least some of that money is making its way into retirement plans through higher contributions.

The path to recovery
The results of the EBRI study provide just one more example of how sticking with a solid investment strategy can pay off in the long run. The secret of continuing to save can help pull your portfolio back from the depths. Although many workers will need to see even more gains before they get back to their previous wealth levels, it's encouraging to see so many investors doing exactly what they ought to be doing.

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Fool contributor Dan Caplinger hasn't gotten back to break-even yet, but maybe someday. He doesn't own shares of the companies mentioned in this article. Bed Bath & Beyond is a Motley Fool Stock Advisor recommendation and an Inside Value selection. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy always pushes you toward the green.