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How Did May’s Markets Move the Average 401(k)?

Industry Trends and Research

There’s an old adage that investors should “Sell in May and go away”—in order to avoid the summer market doldrums—but what about the average 401(k)?

Well, as it turns out that May was a good, though not a great, month for the markets—but a bit better for the average 401(k) account.

Despite some early volatility—bumps from inflation worries and cryptocurrency concerns—the S&P 500 closed up 0.6% (closing stronger at the end of the month), while the Dow rose 1.9%—the fourth month of gains in a row for both (the tech-heavy NASDAQ shed 1.5%, however—snapping a six-month streak of gains.

As for the average 401(k), that of younger (25-34), less tenured (1-4 years) workers was up 1.4% in May, following a 4.7% rise in April, according to estimates[i] from the nonpartisan Employee Benefit Research Institute (EBRI). It’s now up 13.4% year-to-date. 

The average 401(k) of older (age 55-64) workers with more than 20 years of tenure was 0.07% higher, after a 3.9% bump the previous month. The two groups’ frequent divergence in results—that is, the older cohort’s average balance is often larger—is generally more influenced by market moves than by contributions. Oh, year-to-date the older cohort has gained 8.3%.

[i] EBRI’s analysis, based on the organization’s 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.