2017 Closes with a Bang for Average 401(k) Balances

Sure, the markets have been on a tear – all year long. So, how much impact has that had on average 401(k) balances?

Well, let’s just say that those popping champagne corks may well have been in anticipation of those year-end 401(k) statements. An analysis by the nonpartisan Employee Benefit Research Institute (EBRI) found that the average account balance for younger (25-34), less tenured (1-4 years) workers gained 43% in 2017 (at least those who had an account balance at the end of 2014).

What about older workers? Well, the average 401(k) account balance of those aged 55-64 with more than 20 years of tenure ended the year nearly 20% (19.5%) higher than they began the year, according to the analysis.

Building on 2016

As for that starting point, EBRI’s 2016 analysis found that the average account balance for younger (25-34), less tenured (1-4 years) workers rose by nearly a third – 32.3%, while the average 401(k) account balance of older, more tenured workers – and here we’re talking ages 55-64 with more than 20 years of tenure – rose by more than 10%, specifically 10.9%, according to the analysis.

As noted earlier, the markets have been very good to 401(k) balances this year – not to mention consistent contributions. In the fourth quarter, the average 401(k) balance of the younger, less-tenured group enjoyed a 9% bump, while the older demographic, who tend to have larger account balances, and the movement in average balance tends to be more influenced by market moves than contribution flows, climbed 4.9%. The opposite generally holds true for younger workers, whose smaller balances mean that contribution flows generally have a larger effect on the rate of increase.

Oh, and as for December, the average 401(k) balances among younger (25-34), less tenured (1-4 years) consistent 401(k) participants saw a 2.2% increase. The older demographic? Gained 1.1% in the last month of the year. Both were slightly off November’s pace.

All those estimates were based on the actual contribution records and investment choices of several million consistent participants in the EBRI/ICI database. 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.

You can access reports of both cumulative and monthly average account changes here.


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