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Average 401(k) Closes 2021 with a Bang!

Industry Trends and Research

It was (another) volatile, uncertain year—but those year-end 401(k) statements should provide some welcome news for participants.

Rebounding from an omicron-depressed November, the average 401(k) average 401(k) balance of older (age 55-64) workers with more than 20 years of tenure soared 3% in December, while that of younger (25-34), less tenured (1-4 years) workers surged 3.8%, according to estimates from the nonpartisan Employee Benefit Research Institute (EBRI)[i].

Indeed, the S&P 500 ended the year with a mammoth 27.2% gain—the third straight year of double-digit growth for the benchmark, which saw 70 record closes during 2021. 

For the final quarter of 2021, the younger cohort’s average 401(k) balance was up 10%, while the average balance of the older, more tenured group rose 7.7%. 

However, for the full year, the average 401(k) balance of the older group rose 20.5%, and the younger cohort’s balance gained a whopping 33.3%! That outpaced 2020, when despite considerable volatility, the average 401(k) balance of the younger, less tenured cohort ended the year 29.2% higher than it began the year, while that of older, higher tenured workers closed the year 16.5% higher.[ii]  

Remember that the older cohort’s larger balances are, generally speaking, more influenced by market moves than by contributions, while the latter has a greater impact on the smaller balances of the younger group. 

[i] The EBRI/ICI database includes demographic, contribution, asset allocation and loan and withdrawal activity information for millions of participants. 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.

[ii] On the other hand, before the pandemic onslaught, in 2019—a year that the S&P 500 rose more than 28%, and the Dow gained 22% (the NASDAQ was up an even better 35%), the average 401(k) balance—buttressed not only by the markets, but by contributions—ended the year 44.9% higher for those workers aged 25-34 with less than 4 years of tenure, while workers with more than 20 years of tenure, aged 55-64, registered a 24.6% increase.