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A Spooky October for the Average 401(k)

Industry Trends and Research

In a month long associated with stock market crashes, the average 401(k) balance took a hit in October—but remains in the green for 2020.

On a historic basis, and despite the two worst stock market crashes in U.S. history (1929 and 1987), September tends to be worse for stocks (this year was no exception). But by some accounts, October is the most volatile month for stocks—and in this October, the Dow dropped nearly 6% (the biggest decline since March), while the S&P 500 fell 3.5%.

As for the average 401(k) balance—well, it fared somewhat better. For older (age 55-64) workers with more than 20 years of tenure, it dropped 1.6%, while the average 401(k) balance of younger (25-34), less tenured (1-4 years) workers—where contributions have a larger proportionate impact (and the markets less)—slipped 0.8%, according to estimates from the nonpartisan Employee Benefit Research Institute (EBRI).[i]

Year-to-date, the average 401(k) of the younger demographic is (still) ahead 15.1%, while that of the older, more tenured group is still up 5.9%.  

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