What Does Consistent Participation in 401(k) Plans Generate? Changes in 401(k) Plan Account Balances, 2010–2018

ICI Research Perspective, 2020

24 Pages Posted: 8 Dec 2020

See all articles by Sarah Holden

Sarah Holden

Investment Company Institute

Jack VanDerhei

Employee Benefit Research Institute (EBRI)

Steven Bass

Investment Company Institute

Date Written: October 1, 2020

Abstract

This paper provides an update of a longitudinal analysis of 401(k) plan participants drawn from the Employee Benefit Research Institute (EBRI)/Investment Company Institute (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 1.9 million consistent participants in the EBRI/ICI 401(k) database over the eight-year period from year-end 2010 to year-end 2018. The average 401(k) plan account balance for consistent participants rose each year from 2010 through year-end 2017 before edging down in 2018. Overall, the average account balance increased at a compound annual average growth rate of 13.9 percent from 2010 to 2018, rising from $63,756 to $180,251 at year-end 2018. The median 401(k) plan account balance for consistent participants increased at a compound annual average growth rate of 17.3 percent over the period, to $90,015 at year-end 2018. The growth in account balances for consistent participants generally exceeded the growth rate for all participants in the EBRI/ICI 401(k) database.

Keywords: household finance, retirement, 401(k) plans

JEL Classification: D14, G11, J26

Suggested Citation

Holden, Sarah and VanDerhei, Jack and Bass, Steven, What Does Consistent Participation in 401(k) Plans Generate? Changes in 401(k) Plan Account Balances, 2010–2018 (October 1, 2020). ICI Research Perspective, 2020, Available at SSRN: https://ssrn.com/abstract=3731853

Sarah Holden (Contact Author)

Investment Company Institute ( email )

1401 H Street, NW
Research Department
Washington, DC 20005
United States
(202) 326-5915 (Phone)

Jack VanDerhei

Employee Benefit Research Institute (EBRI) ( email )

1100 13th Street, NW
Suite 878
Washington, DC 20005-4204
United States

HOME PAGE: http://www.ebri.org

Steven Bass

Investment Company Institute ( email )

1401 H Street, NW
Washington, DC 20005
United States

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