Once upon a time, in a kinder, gentler work world, companies staged Friday afternoon retirement parties where the boss presented veteran employees with a shiny watch and a handshake as the new retiree fantasized about catching “the big one” or shooting a hole-in-one with all that great leisure time ahead.

Flash forward to 2009, when workers between 56 and 65 have a very different goal — working long enough to recover recent losses sustained in their 401(k)s. Older workers have been particularly hard hit by the financial crisis, primarily because they don’t have the necessary time to earn back the money they lost.

According to a report from the nonpartisan Employee Benefit Research Institute (EBRI), 401(k) participants’ losses were largely determined by their account balance, age, and job tenure. Those with low account balances (most likely younger workers) relative to contributions experienced minimal losses. Those with less than $10,000 had an average growth of 40 percent during 2008, since contributions had a bigger impact than investment losses. But those with more than $200,000 in account balances (most likely older workers who had been in the plan for a long time) had an average loss of more than 25 percent.

Getting that kind of money back won’t happen overnight. The EBRI analysis calculates that if the equity rate of return is assumed to drop to zero (a worst-case scenario) for the next few years, the recovery time could be approximately 2.5 years at the median and 9 to 10 years at the 90th percentile. At a more optimistic 5 percent equity rate-of-return assumption, those with the longest tenure with their current employer would need nearly 2 years at the median to recover but approximately 5 years at the 90th percentile.

It’s a grim scenario for the “near elderly,” especially those who were never covered by a defined benefit plan and have always relied on their 401(k) as their primary retirement savings account. It appears that many of these people had way too much equity exposure too close to the age when gold watches and golf courses should have been within their reach. Nearly one in four between the ages of 56 and 65, says the EBRI report, had more than 90 percent of their account balances in equities at year-end 2007 and more than two in five had more than 70 percent in equities.

Don’t expect these people to leave voluntarily anytime soon. ###