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What Did December Do to the Average 401(k) Balance?

Yes, indeed, December was a rough month for the average 401(k) balance.

According to estimates from the nonpartisan Employee Benefit Research Institute (EBRI), among older (age 55-64) workers with more than 20 years of tenure, whose average balance is generally more influenced by market moves than contributions, the average 401(k) balance lost 4.7%.

The markets were so rough that the average 401(k) account balance for younger (25-34), less tenured (1-4 years) workers shed 4.9% for the month – which means the losses were large enough to overwhelm the positive impact of contributions. 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.

However, that younger cohort can take comfort in knowing that their average 401(k) balance ended 2018 18.8% higher than it began the year. As for those older, more tenured workers? Not so much. The average 401(k) balance for that cohort slipped 0.3% year-to-date. A month ago, year-to-date that older cohort had enjoyed a 4.7% increase.

In fact, 2018 had been a pretty good year for 401(k) balances up till the fourth quarter. In Q4, the average 401(k) account balance for younger (25-34), less tenured (1-4 years) workers lost 5.5%, while for the older (age 55-64) workers with more than 20 years of tenure it fell 7.3%. In November those more long-tenured workers average 401(k) balance was up 1.5% higher, rebounding from October’s 4.2% decline. The younger, less tenured cohort rode out 3.2% bump in November, reversing October’s 3.7% tumble.

That analysis, based on EBRI’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, 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.