The average 401(k) plan account balance of “consistent 401(k) participants” — those who remained active in the same 401(k) plans from year-end 2010 through year-end 2016 — more than doubled in that period. That’s according to new data that the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI), both based in Washington, D.C., […]
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The average 401(k) plan account balance of “consistent 401(k) participants” — those who remained active in the same 401(k) plans from year-end 2010 through year-end 2016 — more than doubled in that period.
That’s according to new data that the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI), both based in Washington, D.C., published Nov. 6.
The study was entitled “What Does Consistent Participation in 401(k) Plans Generate? Changes in 401(k) Account Balances, 2010–2016.” It examined the accounts of 6.1 million consistent 401(k) participants.
The analysis found that average 401(k) plan account balances for consistent participants increased by 122 percent during this period, with all age groups registering “significant increases,” according to an EBRI news release. The 401(k) account-balance growth reflects contributions of employers and workers, in addition to investment returns, and varies with participants’ asset allocation, withdrawals, and loan activity.
“Tracking the account balances of a consistent group of 401(k) participants highlights the growth potential of this powerful savings tool,” Sarah Holden, ICI’s senior director of retirement and investor research, contended. “These results demonstrate the benefit of persistent saving and underscore how 401(k) plans have become such a vital savings vehicle for millions of Americans.”
Why does sample group matter?
This study analyzes a subset of the 27.1 million 401(k) plan participants in the EBRI/ICI database — those who remained active in the same 401(k) plans over the past six years.
It is “important” to study consistent participants because the average 401(k) account balance for the database as a whole can be “buffeted” by 401(k) participants entering and leaving the database. The account holders may change jobs or retire, and plan sponsors enter and leave the database as they change recordkeepers.
EBRI and ICI jointly publish a separate annual update examining “large” cross sections of the whole database.
Studying consistent participants allows for a “more in-depth analysis of the potential” for 401(k) participants to accumulate retirement savings over time.
“The data in this report help us understand the importance of continuous participation in the 401(k) system,” Jack VanDerhei, EBRI’s director of research, said in the release. “By analyzing data from consistent participants over the past six years, we’re able to see that 401(k) plan accounts have a very positive financial effect on retirement nest eggs, thus helping savers plan for the future.”
Key analysis findings
The average 401(k) plan account balance of the consistent participants grew at a compound annual average rate of 14.2 percent, from 2010 through year-end 2016, to $167,330. This was more than double the average account balance of $75,358 among all participants in the EBRI/ICI 401(k) database at year-end 2016.
Among the group of consistent participants, 26.4 percent had more than $200,000 in their 401(k) plan accounts at their current employers, while another 18.4 percent had accumulated between $100,000 and $200,000.
About two-thirds of 401(k) participants’ assets were invested in equities at year-end 2016 — whether through equity funds, the equity portion of target date and non–target date balanced funds, or company stock. Asset allocations were “broadly similar” across the consistent participant sample and participants in the broader EBRI/ICI 401(k) database at year-end 2016.
About the organizations
EBRI describes itself as a “private, nonpartisan,” nonprofit research institute based in Washington, D.C. It focuses on health, savings, retirement, and economic-security issues. EBRI does not lobby and does not take policy positions.
The ICI represents regulated funds globally, including mutual funds, exchange-traded funds, closed-end funds, and unit investment trusts in the United States, and similar funds offered to investors in jurisdictions worldwide.
ICI’s members manage total assets of U.S. $20.5 trillion in this country, serving more than 100 million U.S. shareholders, and U.S. $6.7 trillion in assets in other jurisdictions.
ICI carries out its international work through ICI Global, with offices in London, Hong Kong, and Washington, D.C.
