EBRI Issue Brief

What Does Consistent Participation in 401(k) Plans Generate? Changes in 401(k) Plan Account Balances, 2016–2020

Mar 23, 2023 19  pages


Key Findings:

This paper provides an update of a longitudinal analysis of 401(k) plan participants drawn from the EBRI/ICI 401(k) database.

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). For example, 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 accurately gauge changes, such as growth in account balances, experienced by individual 401(k) plan participants over time.

A few key insights emerge from looking at the 3.7 million consistent participants in the EBRI/ICI 401(k) database over the four-year period from year-end 2016 to year-end 2020.

  • The average 401(k) plan account balance for consistent participants rose each year from year-end 2016 through year-end 2020. Overall, the average account balance increased at a compound annual average growth rate of 19.4 percent from 2016 to 2020, rising from $78,008 to $158,361 at year-end 2020.
  • The median 401(k) plan account balance for consistent participants increased at a compound annual average growth rate of 28.3 percent over the period, to $62,134 at year-end 2020.

Younger 401(k) participants or those with smaller year-end 2016 balances experienced higher percentage growth in account balances compared with older participants or those with larger year-end 2016 balances. Three primary factors affect account balances: contributions, investment returns, and withdrawal and loan activity. The percentage change in average 401(k) plan 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 57.4 percent per year between year-end 2016 and year-end 2020.

401(k) participants tend to concentrate their accounts in equity securities. The asset allocation of the 3.7 million 401(k) plan participants in the consistent group was broadly similar to the asset allocation seen in the annual EBRI/ICI 401(k) database updates. On average at year-end 2020, more than two-thirds of consistent 401(k) participants’ assets were invested in equities—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.