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Stock Surge Stokes Average 401(k) Balance

Practice Management

In what marked the S&P 500’s best first-half performance since 1997, the average 401(k) balance also turned in a solid performance.

According to estimates from the nonpartisan Employee Benefit Research Institute (EBRI), the average 401(k) balance for those aged 25-34 with 1-4 years of tenure has gained 24.3% year-to-date. The average 401(k) balance for older, more tenured workers (those with more than 20 years of tenure, aged 55-46) – balances that are more likely to reflect the impact of the markets than contribution flows – is up 14.5% year-to-date.

The S&P closed Friday at 2941.76, up 16.84 points, or 0.6% on the day and 3.8% for the second quarter, according to the Wall Street Journal. The Dow Jones Industrial Average rose 73.38 points, or 0.3%, to 26599.96 and is now up 14% in 2019.

May, Hemmed

Clearly, thus far 2019 has been good for the average 401(k) balance, though in May – in the wake of escalating talks of trade wars and a tariff “tiff” with China – the average 401(k) balance for those aged 25-34 with 1-4 years of tenure slid 2.9%, dampening the lift from April’s 4.3% increase following the first quarter’s 15.3% surge. As for older (age 55-64) workers with more than 20 years of tenure, in May that average balance tumbled 3.1%, wiping out April’s 2.6% gain.

Despite May’s drop, the second quarter was good for America’s retirement. EBRI’s analysis, based on the non-partisan organization’s huge database of some 27.1 million 401(k) plan participants in nearly 111,000 employer-sponsored 401(k) plans representing some $2 trillion in assets, tracked a 7.8% Q2 increase for the younger, less-tenured demographic, and a 4.2% gain for the older, more tenured group. In June alone those balances climbed 6.4% and 4.7%, respectively.

EBRI’s database is unique in that 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. 

The EBRI/ICI database includes demographic, contribution, asset allocation and loan and withdrawal activity information for millions of participants. EBRI has produced estimates of the cumulative changes in average account balances – both as a result of contributions and investment returns – for several combinations of participant age and tenure. You can find those results here.