Abstract

http://ssrn.com/abstract=1435430
 
 

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What Does Consistent Participation in 401(k) Plans Generate?


Jack VanDerhei


Employee Benefit Research Institute (EBRI)

Sarah Holden


Investment Company Institute

Luis Alonso


Employee Benefit Research Institute (EBRI)


EBRI Issue Brief, No. 332-SR, July 2009

Abstract:     
The annual Employee Benefit Research Institute/Investment Company Institute (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 over time must examine how a consistent group of participants’ accounts have performed over the long term. This paper presents recently available longitudinal data from the EBRI/ICI 401(k) database on consistent participation in a 401(k) plan, through year-end 2007. Looking at consistent participants in the EBRI/ICI 401(k) database over the eight-year period from 1999 to 2007, the average 401(k) account balance increased at an annual growth rate of 9.5 percent over the period, to $137,430 at year-end 2007. The median 401(k) account balance (half above, half below) increased at an annual growth rate of 15.2 percent over the period, to $76,946 at year-end 2007. Data for 2008 are currently being analyzed and are expected to be published later this year. At year-end 2007, the average account balance among consistent participants was double the average account balance among all participants in the EBRI/ICI 401(k) database. The consistent group’s median balance was more than four times larger than the median balance across all participants at year-end 2007. The asset allocation of the 2.4 million 401(k) participants in the consistent group was broadly similar to the asset allocation of the 21.8 million participants in the entire year-end 2007 EBRI/ICI 401(k) database. On average, about two-thirds of 401(k) participants’ assets were invested in equities, through equity funds, the equity portion of balanced funds, and company stock. The data in this report extend only to year-end 2007; the EBRI/ICI data for year-end 2008 are not available at this time, so the sharp market downturn of 2008 is not reflected in this report. Those data are currently being analyzed and are expected to be published later this year.

Number of Pages in PDF File: 16

Keywords: 401(k) plans, asset allocation, employment-based benefits, pension plan assets, self-directed investments

JEL Classification: D31, G11, J26

Accepted Paper Series





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Date posted: July 20, 2009  

Suggested Citation

VanDerhei, Jack and Holden, Sarah and Alonso, Luis, What Does Consistent Participation in 401(k) Plans Generate?. EBRI Issue Brief, No. 332-SR, July 2009. Available at SSRN: http://ssrn.com/abstract=1435430

Contact Information

Jack VanDerhei (Contact Author)
Employee Benefit Research Institute (EBRI) ( email )
1100 13th Street, NW
Suite 878
Washington, DC 20005-4204
United States
HOME PAGE: http://www.ebri.org

Sarah Holden
Investment Company Institute ( email )
1401 H Street, NW
Research Department
Washington, DC 20005
United States
(202) 326-5915 (Phone)
Luis Alonso
Employee Benefit Research Institute (EBRI) ( email )
1100 13th Street, NW
Suite 878
Washington, DC 20005-4204
United States
202-775-6315 (Phone)
202-775-6312 (Fax)

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