Q1 Starts Strong for Average 401(k) Balances

Those Q1 statements should look pretty good, at least for those with consistent participation.

For the quarter, 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 13.4% (that’s not a typo), while those aged 55-64 with more than 20 years of tenure gained 6.4%.

Most of that came from February’s increase, when the average account balance for younger (25-34), less tenured (1-4 years) workers surged by 8.0% (that’s not a typo either), while those aged 55-64 with more than 20 years of tenure rose 4.5%. In March, the younger, less tenured worker balances gained 1.7%, while the longer tenured workers were 0.3% higher.

Of course, younger workers have smaller balances, which 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.

The year got off to a good start in January. 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%.

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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