Market volatility has, at least according to one report, motivated 401(k) participants to make some allocation shifts – and those volatile markets did have some impact on 401(k) balances.
An analysis by the nonpartisan Employee Benefit Research Institute (EBRI) found that the average account balance for younger (25-34), less tenured (1-4 years) workers slipped 1.8% in February (at least those who had an account balance at the end of 2014). Older (age 55-64) workers with more than 20 years of tenure saw January’s 2.9% increase trimmed by a 2.5% loss in the second month of 2018. The latter, who tend to have larger account balances, are generally more influenced by market moves, while the opposite generally holds true for younger workers, whose smaller balances mean that contribution flows generally have a larger effect on the rate of increase.
February marked a break in a long winning streak for average 401(k) balances. EBRI previously found that the average account balance for younger (25-34), less tenured (1-4 years) workers gained 43% in 2017 (at least those who had an account balance at the end of 2014). The average 401(k) account balance of those aged 55-64 with more than 20 years of tenure ended the year nearly 20% (19.5%) higher than they began the year.
All those estimates were based on the actual contribution records and investment choices of several million consistent participants in the EBRI/ICI database. Drawing from that database, which 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 access reports of both cumulative and monthly average account changes here.
