October ‘Treats’ Average 401(k) Balances

Those third quarter statements were likely a disappointment for many — but October went a long way toward healing the damage for average 401(k) balances.

While the average balance of older workers, notably those with 20-29 years of tenure, aged 55-64, slipped just 0.9% in September, that came on top of a 3.6% decline in August. However, according to the estimates from the nonpartisan Employee Benefit Research Institute (EBRI), that same group saw a 5.2% increase in October.

Even more impressive was the 7.8% surge in the average account balance of younger, less-tenured (age 25-34, 1-4 years of tenure) workers in October. Those balances had been flat in September, but down 3.0% the month before. EBRI’s estimates are based on contribution records and actual investment choices of several million consistent participants in the EBRI/ICI database.

Of course, 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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