(Washington, DC) — A new study from the Investment Company Institute (ICI) and the Employee Benefit Research Institute (EBRI) released today finds participants who participated consistently between 2010 and 2019 accrued large 401(k) plan account balances. This trend in consistent participant account balances highlights the accumulation effect of continued 401(k) participation. In fact, at the end of 2019, 33% of the active group had more than $200,000 in their 401(k) plan accounts with their current employers, while another 20% had between $100,000 and $200,000. In contrast, in the broader EBRI/ICI 401(k) database, 11% had accounts over $200,000 and 9% had between $100,000 and $200,000.
The new study analyzed active 401(k) plan participants who maintained accounts with the same plan sponsor each year from 2010 to 2019. Specifically, it tracked the account balances of 1.3 million plan participants. 401(k) who had accounts at the end of 2010. EBRI/ICI 401(k) database and each subsequent year until the end of 2019 (a nine-year period).
Key findings from the study include:
• The average 401(k) plan account balance for regular participants increased each year from 2010 through the end of 2019, with the exception of a slight decrease in 2018. Overall, the balance account average grew at a CAGR of 15.6 percent from 2010 to 2019, growing from $58,658 to $216,690 at the end of 2019.
• The median 401(k) plan account balance for regular participants increased at a CAGR of 18.8% over the period, reaching $108,433 at the end of 2019.
• Growth in 401(k) plan account balances for regular participants has generally exceeded the growth rate for all participants in the EBRI/ICI 401(k) database. At the end of 2019, more than half (53%) of regular 401(k) plan participants had account balances above $100,000, compared to 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 pathways to a secure retirement, and account growth for regular 401(k) plan participants highlights the power of this important savings and savings tool. ‘investment,” said Sarah Holden, senior director of ICI. retirement and search for investors. “While markets can be volatile, the cumulative growth and upward trends we’ve seen over the nine-year study period show the benefit of staying the course in their 401(k) plans.”
Changes in 401(k) plan account balances are influenced by contributions, asset allocation, withdrawals and lending activity. “The significant growth in 401(k) plan accounts among young and new 401(k) participants underscores the importance of contributions and the power of funding,” said Craig Copeland, director of benefits research at heritage, EBRI. “Younger participants also tend to have higher equity allocations, often through target date funds, so the balances of these consistent participants reflect stock market performance over the study period. .”
Other key findings from the report include that younger 401(k) participants or those with smaller 2010 year-end balances experienced higher percentage growth in account balances compared to older participants or those with smaller 2010 year-end balances. whose end-of-year 2010 sales are larger. The research also found that these regular 401(k) participants tend to concentrate their accounts in equity securities. Overall, equity funds — the equity portion of target date funds and other balanced funds and corporate stocks — accounted for about two-thirds of their 401(k) plan account assets at the start and the end of the study period.
The study is based on the EBRI/ICI database of employer-sponsored 401(k) plans, compiled as part of a collaborative research project undertaken by the two organizations since 1996. The project is unique because it includes data provided by a wide variety of diet curators. and represents the activity of participants in 401(k) plans of varying sizes ranging from very large to small businesses with a variety of investment options. The EBRI/ICI 2019 database includes statistical information on 11.1 million 401(k) plan participants in 73,312 plans, which hold $0.9 trillion in assets and cover 18% of the universe of active 401(k) plan members.