Consistent 401(k) participants had something to be thankful for last month, as average balances continued to gain ground, according to the Employee Benefit Research Institute (EBRI).
For individuals in the EBRI/ICI database during that month, the average account balance gained another 3.5% for participants ages 25-34 with 1-4 years of tenure (and consistent participation since 2012), on top of October’s 4.4% advance.
As for participants between 55 and 64 with 20 to 29 years of tenure, who tend to have larger balances and for whom balances tend to be more influenced by market moves than contribution flows, the average account balance rose 1.9%, following October’s 2.6% increase. The percent change in average account balance of participants in their 20s is more heavily influenced by the relative size of their contributions to their account balances.
In September, those participant demographic groups lost 0.5% and 1.4%, respectively.
Three primary factors impact account balances:
- contributions
- investment returns
- withdrawal/loan activity
The Employee Benefit Research Institute (EBRI), through the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project, includes data provided by a wide variety of plan record keepers and, therefore, portrays the activity of several million participants in 401(k) plans of varying sizes — from very large corporations to small businesses — with a variety of investment options.
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.
