February Bounce Boosts 401(k)s

The so-called “Trump bump” looks to be bringing good news to those 401(k) balances.

For the month, the nonpartisan Employee Benefit Research Institute (EBRI) found that the average account balance for younger (25-34), less tenured (1-4 years) workers surged by 8.0% (that’s not a typo) in February, while those aged 55-64 with more than 20 years of tenure rose 4.5%.

Of course, 2017 had already gotten off to a good start with January’s gains. The EBRI analysis, based on the actual contribution records and investment choices of several million consistent participants in the EBRI/ICI database, found that the average account balance for younger (25-34), less tenured (1-4 years) workers rose by 3.2% in January, while those aged 55-64 with more than 20 years of tenure gained 1.6%.

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.

All in all, those first quarter statements are looking like they’ll bring some very good news for retirement savings.

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.

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