The markets had their best August since 1986—and it was a pretty good month for the average 401(k) balance as well.
Temperatures and major U.S. stock indexes, notably the S&P 500, continued to rise. The latter not only enjoyed its fifth consecutive month of gains, but recorded seven record highs during the month,[i] as the Dow—which at month’s end underwent a reconfiguration—regained positive ground for the year, and now is within striking distance of its Feb. 12 high of 29,551.42.
As for that average 401(k) balance—well, for older (age 55-64) workers with more than 20 years[ii] of tenure, it gained another 4.2%, and is now up 10% higher year-to-date, according to estimates from the nonpartisan Employee Benefit Research Institute (EBRI). That cohort’s balances are generally more influenced by market moves than contributions.
The average 401(k) balance of younger (25-34), less tenured (1-4 years) workers—where contributions have a larger proportionate impact—is now up 17.7% year-to-date, having risen 5.7% during August.
A month ago, the younger, less tenured cohort’s average 401(k) was up 5.1%, while the older cohort’s rose 4.0%.
[i]On a somewhat more cautionary note, while the Dow Jones Industrial Average and the technology-heavy NASDAQ Composite posted respective monthly gains of 7.6% and 9.6%, and their best performances since April, a handful of technology companies—Netflix, Microsoft, Facebook, Alphabet, Amazon and Apple—account for more than one-quarter of the S&P’s value. In fact, without them, the index would still be in negative territory, according to the Washington Post.
[ii]EBRI’s analysis is based on the organization’s huge database of some 26 million 401(k) plan participants in more than 101,000 employer-sponsored 401(k) plans representing nearly $2 trillion in assets. It includes data provided by a wide variety of plan recordkeepers and, therefore, portrays the activity of participants in 401(k) plans of varying sizes—from very large corporations to small businesses—with a variety of investment options.
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September 01, 2020 at 07:14PM
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Average 401(k) Continued to Sizzle in August - National Association of Plan Advisors
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