It’s been said that March comes in like a lion, and goes out like a lamb – well, not this quarter, at least not when it comes to the average 401(k) balance.
The S&P 500 notched its best quarterly performance since the third quarter of 2009, and the average 401(k) balance for those aged 25-34 with 1-4 years of tenure ended the quarter 15.3% higher than it ended the year.
As for older (age 55-64) workers with more than 20 years of tenure, that average balance grew nearly 10% in the first quarter, according to estimates from the nonpartisan Employee Benefit Research Institute (EBRI).
Considering the monthly trends thus far, that end result wasn’t really a surprise. In February, the average 401(k) account balance for younger (25-34), less-tenured (1-4 years) workers was up 3.8%, and that was on top of a 7.5% surge in January.
Similarly, for older (age 55-64) workers with more than 20 years of tenure, that average balance was 2.1% higher in February, following a 5.4% climb in the first month of 2019. The latter group’s average is generally more influenced by market moves than contributions, while that of the younger cohort tends to be driven by contribution rates.
March ‘Madness’?
As for March, well the average 401(k) balance for the group aged 25-34 with 1-4 years of tenure ended the month like a lion, closing up 3.3%. The older, more tenured group (aged 55-64, more than 20 years of tenure) gained 2.2% in March.
Remember that the EBRI estimates are based on the actual contribution records and investment choices of several million consistent participants in the EBRI/ICI database. That analysis, based on EBRI’s huge database of some 26 million 401(k) plan participants in more than 101,000 employer-sponsored 401(k) plans representing nearly $2 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.
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. You can find those results here.
