Market Downdraft Pulled 401(k)s Down in August

August was not a pretty month for 401(k) balances.

The average account balance of younger, less-tenured (age 25-34, 1-4 years of tenure) workers fell 3.0% in August, according to the nonpartisan Employee Benefit Research Institute (EBRI), wiping out most of July’s 3.5% gain.

Meanwhile, the average balance of older workers, notably those with 20-29 years of tenure, aged 55-64, also tumbled 3.6%, double the gain recorded the prior month, according to EBRI’s estimates, which are based on the contribution records and investment choices of several million consistent participants in the EBRI/ICI database.

However, it was workers with 10-19 years of tenure, aged 35-44 and 45-54, who took the largest hit; the average 401(k) balance in the 35-44 group shed 4.2%, while the 45-54 group lost 4.0%.

Nonetheless, since January 2014, the average 401(k) balance of 25- to 34-year-olds with 1-4 years of tenure is up 66.7%, according to EBRI, and the average 401(k) balance of 55- to 64-year-olds with 20-29 years of tenure is up 14.0%.

Older, higher tenured participants tend to have larger account balances, and the movement in average balance tends to be more influenced by market moves, while the accounts of younger, less tenured workers are more likely to be influenced by contribution flows.

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

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