If April showers bring May flowers, then the average 401(k) balance should be quite a bouquet!
In April, the average 401(k) balance for those aged 25-34 with 1-4 years of tenure gained another 4.3% for the month, adding to the first quarter’s 15.3% surge.
As for older (age 55-64) workers with more than 20 years of tenure, that average balance rose another 2.6%, after an increase of nearly 10% in the first quarter, according to estimates from the nonpartisan Employee Benefit Research Institute (EBRI). The average balance of older workers tends to be more sensitive to market swings due to those workers’ larger account balances, while the accounts of younger, less tenured workers are more likely to be influenced by contribution flows.
The first four months of 2019 have been the best start for the market since the January-April period of 1987 – though as you may recall, that year didn’t end well. Still, since 1980, when the S&P 500 has gained 10% or more in the January-April period, the S&P, Dow Jones Industrial Average and Nasdaq Composite have traded higher eight out of nine times, according to a CNBC analysis.
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 27.1 million 401(k) plan participants in nearly 111,000 employer-sponsored 401(k) plans representing some $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.
