News & Information

 

FEATURED PRODUCT

Pension and Employee Benefits: Code, ERISA, & Regulations
Authoritative and comprehensive reference to pension and selected welfare benefit provisions of the I.R.C., ERISA and the associated regulatory authority.

Learn More »

CCH® PENSION AND BENEFITS — 07/27/09

Average 401(k) Plan Account Balances Doubled Between 1999 And 2007; Median Grew By 210%

from Spencer’s Benefits Reports: The average 401(k) plan account balance more than doubled for 2.4 million people who were consistently plan participants from 1999 through 2007. The average account balance was $137,430 in 2007, up from$66,660 in 1999, according to the July 2009 Issue Brief jointly issued by the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI). The median account balance grew by 210% during the same nine-year period, from $24,844 to $76,946.

The 2.4 million participants who were followed over the nine-year period tended to be older and have more tenure in 2007 than the 21.8 million 401(k) plan participants in the overall EBRI/ICI 401(k) data base. The result tended to be larger account balances for the 2.4 million participants in the nine-year group. For example, 21.1% of the nine-year group participants had account balances in excess of $200,000, while only 8.4% of the participants in the standard data base had account balances in excess of $200,000. A similar result was found with participants having account balances between $100,000 and $200,000; 21.0% of the nine-year group versus 10.3% of the standard data base group had account balances of $100,000 to $200,000.

Participants in the nine-year group who were younger or had fewer years of tenure experienced the largest increases in average account balance between 1999 and 2007 because contributions produced significant account balance growth. For example, the average account balance for participants in their 20s rose 1,073.6% (or a 36.0% annual average growth rate) between the end of 1999 and the end of 2007.

In contrast, the average account balance for older participants or those with longer tenures showed more modest growth because investment returns rather than contributions generally accounted for most of the change in accounts with larger balances. For example, the average account balance of participants in their 60s grew by 44.3% between the end of 1999 and the end of 2007 (a 4.7% annual average growth rate).

The equity exposure of 401(k) plan account balances was consistent between the nine-year group and the standard data base group–about two-thirds of the 401(k) plan participants’ assets. Younger participants in both groups favored equities, while older participants were more likely to invest in fixed-income securities. The survey found that 45.3% of the entire nine-year group had invested more than 80% of their assets in equities at the end of 2007, with 20.8% having invested 60%-80% in equities and 10.4% having no equities in their portfolio.

The survey, entitled “What Does Consistent Participation in 401(k) Plans Generate?,” can be found at either http://www.ICI.org or http://www.EBRI.org.

Visit our News Library to read more news stories.