Pass this on to anyone on the fence.
In just six years, 401k participants who remained in the same plan and made regular contributions more than doubled their account balances, according to new data.
Findings were published in a joint report released Tuesday by the Employee Benefits Research Institute (EBRI) and the Investment Company Institute (ICI) titled “What Does Consistent Participation in 401k Plans Generate? Changes in 401k Plan Account Balances.”
The study examined 6.1 million participants who remained in the same plan from 2010 to 2016 and made consistent contributions. For savers who socked money away steadily, average 401k account balances rose by 122 percent.
Sure, the market mostly favored investors during that time period, but data are a testament to consistency nonetheless.
In fact, “[t]he consistent group’s median balance was nearly five times the median balance across all participants at year-end 2016,” EBRI noted in an Issue Brief on the study.
“Tracking the account balances of a consistent group of 401k participants highlights the growth potential of this powerful savings tool,” Sarah Holden, ICI’s senior director of retirement and investor research, said in a statement. “These results demonstrate the benefit of persistent saving and underscore how 401k plans have become such a vital savings vehicle for millions of Americans.”
Further analysis by EBRI/ICI found:
- The average 401k plan account balance of 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 database.
- Among the group of consistent participants, 26.4 percent had more than $200,000 in their 401k plan accounts at their current employers. Another 18.4 percent had accumulated between $100,000 and $200,000.
- About two-thirds of 401k participants’ assets were invested in equities at year-end 2016—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 401k database.
Jessa Claeys is a writer, editor and graphic designer.