For anyone in need of yet another example of the benefits of routine, consistent saving and investing, this is it.
“Overall, the average account balance increased at a compound annual average growth rate of 15.6 percent …”
Retirement plan participants who did so accumulated sizable 401(k) plan account balances in the last decade, according to a new joint study from ICI and the Employee Benefit Research Institute (EBRI).
Analysis of 401(k) plan accounts of the 1.3 million “consistent” participants in the EBRI/ICI 401(k) database from year-end 2010 to year-end 2019 found:
- The average 401(k) plan account balance for consistent participants rose each year from 2010 through year-end 2019, except for a slight decline in 2018. Overall, the average account balance increased at a compound annual average growth rate of 15.6 percent from 2010 to 2019, rising from $58,658 to $216,690 at year-end 2019.
- The median 401(k) plan account balance for consistent participants increased at a compound annual average growth rate of 18.8 percent over the period, to $108,433 at year-end 2019.
- The growth in 401(k) plan account balances for consistent participants generally exceeded the growth rate for all participants in the EBRI/ICI 401(k) database. By year-end 2019, more than half (53 percent) of the consistent 401(k) plan participants had account balances of more than $100,000, compared with about one-fifth of 401(k) plan participants in the entire EBRI/ICI 401(k) database.
“401(k) plans remain one of the most important avenues toward a secure retirement, and the account growth for consistent 401(k) plan participants highlights the power of this important saving and investing tool,” Sarah Holden, ICI Senior Director of Retirement and Investor Research, said in a statement. “While markets can be volatile, the compounding growth and upward trends we observed over the nine-year study period shows the benefit of staying the course in their 401(k) plans.”
Other Findings
Other key findings include younger 401(k) participants or those with smaller year-end 2010 balances experienced higher percent growth in account balances compared with older participants or those with larger year-end 2010 balances.
The research also found that these consistent 401(k) participants tend to concentrate their accounts in equity securities.
Overall, equities—equity funds, the equity portion of target-date funds and other balanced funds, and company stock—represented about two-thirds of their 401(k) plan account assets at both the beginning and end of the study period.