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Q2 Off to a Good Start for the Average 401(k)

Industry Trends and Research

It’s been said that April showers bring May flowers, but April was mostly sunny skies for the average 401(k) balance.

U.S. stocks slipped back on the last day of the month, but that was from record highs. The S&P 500 rose 5.2% for the month—its best monthly increase since November 2020 (nearly 11%)—while the Dow climbed more than 2.5%, and the NASDAQ closed up more than 5%. Regarding the reasons for these records, companies comprising about two-thirds of the S&P 500 market capitalization have reported results so far, and 84% of them exceeded estimates, according to data from Credit Suisse analyst Jonathan Golub.

As for the average 401(k), that of younger (25-34), less tenured (1-4 years) workers was up 4.7% in April, on top of a 3.8% gain in March, according to estimates[i] from the nonpartisan Employee Benefit Research Institute (EBRI). The average 401(k) of older (age 55-64) workers with more than 20 years of tenure was 3.9% higher, on top of last month’s 3.5% gain. 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.

Year-to-date, the younger cohort is up 11.8%, while the older, more tenured group’s average 401(k) is up 7.5%.

Now as for those May “flowers”…

[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.