Average 401(k) Balances Continue to Surge in Q2

While they’re not quite as strong as the numbers for the first quarter of the year, there should be plenty to celebrate in this year’s June 30 participant statements.

For younger (age 25-34), less tenured (1-4 years) workers, the average 401(k) account balance has risen 21.7% year-to-date (that’s not a typo). Even among older workers – those aged 55-64 with more than 20 years of tenure – the average 401(k) balance is up nearly 10% (9.8%, to be precise) since January 1.

It’s not like we couldn’t have seen this coming. In the first quarter of the year, the nonpartisan Employee Benefit Research Institute (EBRI) found that the average account balance for younger (25-34), less tenured (1-4 years) workers surged by 13.4% (that’s still not a typo), while those aged 55-64 with more than 20 years of tenure gained 6.4%.

That analysis, based on EBRI’s huge database of some 24 million 401(k) plan participants in 64,619 employer-sponsored 401(k) plans representing $1.536 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.

Q2 Continuance?

The second quarter has proven to be almost as strong: a 7.3% gain for the younger, less-tenured workers and a 3.1% increase for the older group. Of course, younger workers have smaller balances, and that means that contribution flows, rather than market moves, generally have a larger effect on the rate of increase. On the other hand, older, higher tenured participants tend to have larger account balances, and the movement in average balance tends to be more influenced by market moves than contribution flows.

In June, 25- to 34-year-olds with 1-4 years of tenure enjoyed a 2.0% rise in their average 401(k) account balance, while the average 401(k) balance for 55- to 64-year-olds with more than 20 years of tenure gained 0.6%.

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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