Each year, the Employee Benefit Research Institute (EBRI) and Investment Company Institute (ICI) publish an annual study on the impact of consistent 401(k) plan participation. In the latest study, EBRI/ICI considered “consistent participants” as those 8.8 million people who actively contributed to the same 401(k) plan for a four-year period (from 2010 to 2014).
In this study, three remarkable insights emerged.
Retirement accounts are growing.
“Overall, the average account balance increased at a compound annual average growth rate of 15.5 percent from 2010 to 2014,” stated the EBRI website, creating an average account balance of $130,493 for plan participants.
Especially when you stick to the plan.
At the end of 2014, average account balance among consistent participants was 1.7 times the average account balance among all 24.9 million participants in the EBRI/ICI 401(k) database. In addition, those who participated consistently (again, on the same plan over all four years), had a median balance that was over three times that of their peers.
As one would expect, 401k account balances tend to increase with age and job tenure. In fact, among consistent participants, over 40% of plan participants have balances of over $100,000 in their retirement accounts with their current employers. Nearly 25% have account balances over $200,000.
Even when the plan is the same.
The study also revealed that the asset allocation of the consistent participants was “broadly similar” to the larger group. At the end of 2014, almost two-thirds of all participants’ assets were invested in equity securities, including company stock, equity funds, the equity portion of target-date funds, or the equity portion of non-target-date balanced funds. The study also found that older 401(k) participants tended to have lower concentrations in equities than their younger counterparts.
What does it all mean? For one, it’s great news for employers and employees alike. Employers who showcase the benefits of consistent participation and contribution can leverage the information to increase employment tenure. And employees who see the benefit of increased retirement benefits may see additional value in pursuing career goals within a company structure to improve their overall net worth.
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