The Investment Company Institute took a look at its 401k database recently, something it maintains with EBRI.
A few key insights emerged from its analysis of the 7.3 million consistent participants over the five-year period (2010 through 2015).
For instance, the average plan account balance for consistent participants rose each year from 2010 through year-end 2015.
Overall, the average account balance increased at a compound annual average growth rate of 13.9 percent from 2010 to 2015, to $143,436 at year-end 2015.
The median 401k plan account balance for consistent participants increased at a compound annual average growth rate of 17.9 percent over the period, to $66,412 at year-end 2015.
The growth in account balances for consistent participants greatly exceeded the growth rate for all participants in the EBRI/ICI 401k database.
It also found that:
Analysis of a consistent group of 401k participants highlights the impact of ongoing participation in 401k plans. At year-end 2015, the average account balance among consistent participants was almost double the average account balance among all participants in the EBRI/ICI 401k database. The consistent group’s median balance was almost four times the median balance across all participants at year-end 2015.
Younger participants, or those with smaller year-end 2010 balances, experienced higher percentage growth in account balances compared with older participants or those with larger year-end 2010 balances. Three primary factors affect account balances: contributions, investment returns, and withdrawal and loan activity.
The percent change in average plan account balance of participants in their twenties was heavily influenced by the relative size of their contributions to their account balances and increased at a compound average growth rate of 43.1 percent per year between year-end 2010 and year-end 2015.
Participants tend to concentrate their accounts in equity securities. The asset allocation of the 7.3 million 401k plan participants in the consistent group was broadly similar to the asset allocation of the 26.1 million participants in the entire year-end 2015 EBRI/ICI database.
On average at year-end 2015, about two-thirds of 401k participants’ assets were invested in equities, either through equity funds, the equity portion of target date funds, the equity portion of non–target date balanced funds, or company stock. Younger participants tend to have higher concentrations in equities than older 401k participants.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
