What Does Consistent Participation in 401(k) Plans Generate? Changes in 401(k) Plan Account Balances, 2010–2015

October 2017
EBRI Issue Brief #439
Paperback, 24 pp.
PDF, 1,998 kb
Employee Benefit Research Institute, 2017

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Executive Summary

This paper provides an annual update of a longitudinal analysis of 401(k) plan participants drawn from the EBRI/ICI 401(k) database—the largest participant-level database of its kind, with about 26.1 million 401(k) participants at year-end 2015.

Because the annual cross sections cover participants with a wide range of participation experience in 401(k) plans, meaningful analysis of the potential for 401(k) participants to accumulate retirement assets must examine the 401(k) plan accounts of participants who maintained accounts over all of the years being studied (consistent participants). This paper focuses on consistent participants for the 2010–2015 period.

A few key insights emerge from looking at the 7.3 million consistent participants in the EBRI/ICI 401(k) database over the five-year period from year-end 2010 to year-end 2015.

  • The average 401(k) plan account balance for consistent participants rose each year from 2010 through year-end 2015. Overall, the average account balance increased at a compound annual average growth rate of 13.9 percent from 2010 to 2015, to $143,436 at year-end 2015.
  • The median 401(k) plan account balance for consistent participants increased at a compound annual average growth rate of 17.9 percent over the period, to $66,412 at year-end 2015.
  • The growth in account balances for consistent participants greatly exceeded the growth rate for all participants in the EBRI/ICI 401(k) database. Because of changing samples of providers, plans, and participants, changes in account balances for the entire database are not a reliable measure of how individual participants have fared. A consistent sample is necessary to examine the growth in account balances experienced by individual 401(k) plan participants over time.

Analysis of a consistent group of 401(k) participants highlights the impact of ongoing participation in 401(k) plans. At year-end 2015, the average account balance among consistent participants was almost double the average account balance among all participants in the EBRI/ICI 401(k) database. The consistent group’s median balance was almost four times the median balance across all participants at year-end 2015.

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. Three primary factors affect account balances: contributions, withdrawal and loan activity, and investment returns. The percent change in average account balance of participants in their twenties was heavily influenced by the relative size of their contributions to their account balances and increased at a compound average growth rate of 43.1 percent per year between year-end 2010 and year-end 2015.

401(k) participants tend to concentrate their accounts in equity securities. The asset allocation of the 7.3 million 401(k) plan participants in the consistent group was broadly similar to the asset allocation of the 26.1 million participants in the entire year-end 2015 EBRI/ICI 401(k) database. On average at year-end 2015, about two-thirds of 401(k) participants’ assets were invested in equities, either through equity funds, the equity portion of target date funds, the equity portion of non–target date balanced funds, or company stock. Younger 401(k) participants tend to have higher concentrations in equities than older 401(k) participants.