Consistent Average 401(k) Balances More Than Doubled Since 2007

At year-end 2014, the average account balance among consistent participants was almost twice the average account balance among all participants in the EBRI/ICI 401(k) database – and the consistent group’s median balance gap was even larger.

According to a report from the nonpartisan Employee Benefit Research Institute (EBRI), the average 401(k) plan account balance for consistent participants rose each year from 2010 through year-end 2014. Overall, the average account balance increased at a compound annual average growth rate of 17.3% from 2010 to 2014, to $138,553 at year-end 2014.

There are many dramatic numbers in the report, perhaps none so striking (though you have climb through the appendix charts – Figure A6 in this case – to find it) as the “percent change in average 401(k) plan account balance among consistent 401(k) participants by age and tenure, 2007–2014.”  A look at the group in their 20s reveals a whopping 41.7% compound ANNUAL average growth rate during that period.  For those in their 30s, we’re talking about a 22.4% compound annual average growth rate.  Now, make no mistake – that’s contributions as well as earnings, and the growth rates of the younger groups are more heavily influenced by the former.  Still.

The median (mid-point) 401(k) plan account balance for consistent participants increased at a compound annual average growth rate of 19.7% over the period, to $56,653 at year-end 2014 – more than three times the median balance across all participants in the EBRI/ICI 401(k) database at year-end 2014.

EBRI’s longitudinal analysis tracks the account balances of 8.8 million 401(k) plan participants who had accounts in the year-end 2010 EBRI/ICI 401(k) database and each subsequent year through year-end 2014.

In recent years, contributions to 401(k) plans have averaged a bit over about $300 billion a year, and benefits paid (including rollovers) have averaged about nearly $290 billion. Investment returns – interest, dividends, and realized and unrealized asset appreciation/depreciation vary significantly year-to-year – on net had nearly no impact on assets in 2011 and provided a significant boost as the stock market rose sharply in 2013.

At year-end 2014, more than a quarter (26.9%) of this consistent group had more than $200,000 in their 401(k) plan accounts at their current employers, and another one-in-five (19.3%) had between $100,000 and $200,000. In contrast, in the broader EBRI/ICI 401(k) database, just 10.7% had accounts with more than $200,000, and 9.5% had between $100,000 and $200,000 at year-end 2014.

Younger 401(k) participants or those with smaller year-end 2010 balances experienced higher percent growth in account balances compared with older participants or those with larger year-end 2010 balances. Three primary factors affect account balances: contributions, withdrawal and loan activity, and investment returns. That said, the percent change in average account balance of participants in their 20s (who tend to have smaller account balances relative to their contributions) increased at a compound average growth rate of 44.1% per year between year-end 2010 and year-end 2014.

7-Year ‘Hitch’

Looking across a longer time period, at year-end 2014, the average 401(k) plan account balance of the 2007-2014 consistent group was $170,290, more than twice the average account balance of $76,293 among participants in the entire EBRI/ICI 401(k) database. The median 401(k) plan account balance among the consistent participants was $87,418 at year-end 2014, more than four times the median account balance of $18,127 for participants in the entire EBRI/ICI 401(k) database. This longer time period was based on a group of 3.5 million 401(k) plan participants who had accounts in the year-end 2007 EBRI/ICI 401(k) database and each subsequent year through year-end 2014.

Altogether, from year-end 2007 through year-end 2014, the average 401(k) plan account balance among the 2007-2014 group of consistent participants increased by 110%, rising from $81,031 at year-end 2007 to $170,290 at year-end 2014. This translates into a compound annual average growth rate of 11.2% over the 7-year period. The median account balance among this consistent group also grew, more than doubling from $32,804 in 2007 to $87,418 in 2014 (a compound annual average growth rate of 15.0%).

Add Your Comments

2 Comments

  1. url url'>Kenneth Staudle
    Posted September 17, 2016 at 6:08 pm | Permalink

    The article sounds like the participant account’s are moving in the right direction but what are the ages of these participants. If most of the participants (26%) are getting close to retirement age whose values’s are $200,000 then this is not a good sign. The bulk of the 401(k) participants of the 26% will mot be putting new contributions in there accounts.

  2. Nevin E. Adams, JD
    Posted September 19, 2016 at 10:48 am | Permalink

    Kenneth, You can find that broken down by age (and tenures) in table 5 of the report.

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