Things Looking Up for Those June 30 Statements

Trump “bump” or not, April was no rainy day for 401(k) balances – and they continued to bloom in May.

In fact, 2017 contributions and markets have provided a nice boost to the average 401(k) balance.  According to an analysis by the nonpartisan Employee Benefit Research Institute (EBRI), the average account balance for younger (25-34), less tenured (1-4 years) workers is up nearly 20% since Dec. 31, 2016 (19.3%). For those aged 55-64 with more than 20 years of tenure, it has gained 9.1%.

That analysis, 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, 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, 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.

May Momentum

As for May alone, EBRI says that the average account balance for younger (25-34), less tenured (1-4 years) workers rose (another) 2.6%, while those aged 55-64 with more than 20 years of tenure gained 1.3%.

Nor was May an outlier; the results pretty much mirrored April’s gains, when the average account balance for younger (25-34), less tenured (1-4 years) workers rose another 2.5%, and those aged 55-64 with more than 20 years of tenure gained 1.2%.

For the first quarter, 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%.

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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