Summer Surge in 401(k) Balances Cools in August
Temperatures continued to rise in August, but the increase in average 401(k) balances cooled off a bit.
Not that the hot streak abated much. According to the nonpartisan Employee Benefit Research Institute (EBRI) found that the average account balance for younger (age 25-34), less tenured (1-4 years) workers rose another 1.8% in August, on top of the 3.0% surge in the month of July. The average account balance those age 55-64 with more than 20 years of tenure added 0.7% to July’s 1.7% increase.
That analysis is based on EBRI’s huge database of some 24 million 401(k) plan participants in 64,619 employer-sponsored 401(k) plans representing $1.536 trillion in assets. It is unique because it includes data provided by a wide variety of plan recordkeepers and, therefore, portrays the activity of participants in 401(k) plans of varying sizes – from very large corporations to small businesses – with a variety of investment options.
Of course, younger workers have smaller balances, and that means that contribution flows, rather than market moves, generally have a larger effect on the rate of increase. On the other hand, older, higher tenured participants tend to have larger account balances, and the movement in average balance tends to be more influenced by market moves than contribution flows.
EBRI has produced estimates of the cumulative changes in average account balances — both as a result of contributions and investment returns — for several combinations of participant age and tenure. You can access reports of both cumulative and monthly average account changes here