The annual EBRI/ICI 401(k) database update report is based on large cross-sections of 401(k) plan participants. Whereas the 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 how a consistent group of participants’ accounts change over time. Looking at consistent participants in the EBRI/ICI 401(k) database in the wake of the financial crisis (over the four-year period from year-end 2007 to year-end 2011):
- The average 401(k) account balance fell 34.8 percent in 2008, then rose from 2009 to 2011. Overall, the average account balance increased at a compound annual average growth rate of 5.4 percent over the 2007–2011 period, to $94,482 at year-end 2011.
- The median 401(k) account balance (half above, half below) increased at a compound annual average growth rate of 11.5 percent over the period, to $42,082 at year-end 2011.
- Analysis of a consistent group of 401(k) participants highlights the impact of consistent participation in 401(k) plans. At year-end 2011, the average account balance among consistent participants was 60 percent higher than the average account balance among all participants in the EBRI/ICI 401(k) database. The consistent group’s median balance was about two-and-a-half times the median balance across all participants at year-end 2011.
- Younger participants or those with smaller initial balances experienced higher percentage growth in account balances compared with older participants or those with larger initial balances. There are three primary factors that impact account balances: contributions, investment returns, and withdrawal/loan activity. The percentage change in average account balance of consistent participants in their 20s was heavily influenced by the relative size of their contributions to their account balances and increased at a compound average rate of 41.0 percent per year between year-end 2007 and year-end 2011.
- 401(k) participants tend to concentrate their accounts in equity securities. The asset allocation of the 8.6 million 401(k) plan participants in the consistent group was broadly similar to the asset allocation of the 24.0 million participants in the entire year-end 2011 EBRI/ICI 401(k) database. On average, about three-fifths 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. Between year-end 2007 and year-end 2011, the allocation of consistent participant balances to equities, edged back from 42.9 percent of participants with more than 80 percent of their accounts in equities to 38.4 percent at year-end 2011. The percentage of consistent 401(k) participants without any allocation to equities remained unchanged at 11.8 percent.