The average 401(k) had a pretty good year in 2020, but 2021 is a whole new year.
U.S. stocks ended the month with their worst week since October—though on the last day of that month those two stocks that have been at the center of recent social media controversy—GameStop and AMC Entertainment—rose 68% and 54%, respectively (once some of those trading platform restrictions were lifted)—though still was lower than they had traded earlier in the week.
In January, the Dow fell 2% and the S&P 500 fell 1.1%, though both set several new records throughout the month.
In January the average 401(k) balance—as tracked by the non-partisan Employee Benefit Research Institute (EBRI)[1] got off to a slow start after a robust 2020. The average 401(k) balance of the younger, less tenured cohort ended 2020 29.2% higher than it began the year, but rose just 0.3% in January, arguably because the balances of that cohort (ages 25-34, tenure of just 1-4 years) tend to be influenced more by contributions than by market movement.
As for older, longer tenured workers (whose balances tend to be influenced more by market movement than contributions), while the average 401(k) closed the year 16.5% higher, it was down 0.6% for the first month of 2021.
Footnote
[1] EBRI’s analysis, based on the organization’s database of some 26 million 401(k) plan participants in more than 101,000 employer-sponsored 401(k) plans representing nearly $2 trillion in assets, is unique because it includes data provided by a wide variety of plan recordkeepers and, therefore, portrays the activity of participants in 401(k) plans of varying sizes—from very large corporations to small businesses—with a variety of investment options.
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