EBRI: K Plan Balances Grew in '03

The inflated 401(k) balances in 2003 were influenced by added contributions and changes in the value of assets already contained in the accounts, according to data aggregated and reported by the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI) from the BRI/ICI 401(k) database. The database tracks the behavior of about a third of all active 401(k) participants – or 15 million participants holding $776 billion in assets as of December 31, 2003.

Since 1999, the average account balance for those who have maintained accounts has grown 17.1%, from 1999’s $65,572 to $76,809 in 2003. Outcomes for older and younger workers are significantly different. The average account balance for a worker in his or her 20s jumped 138.7% between the end of 1999 and the end of 2003, largely because new contributions overwhelmed market activity. By contrast, the average account balance for workers in their 60s with 30 years of tenure declined 15.5% because market performance and withdrawals swamped new contributions.

Participants, for the most part, have left their portfolio alone; the data shows that, beyond the market-driven changes, 401(k) plan participants do not appear to have made significant asset reallocations. Examining participant investment allocations in 2003, approximately two-thirds of 401(k) account assets were invested in stocks at year-end 2003. Broken down even further, 45% of 401(k) plan participants’ assets were invested in equity funds (which include mutual funds and other pooled investments) and 16% in company stock. Other assets were invested in guaranteed investment contracts (GICs) (13%), bond funds (10%), balanced funds (9%), and money funds (5%).

“As anticipated, a rising equities market is reflected in growing retirement account balances,” said EBRI President and CEO Dallas Salisbury.

The report, published as the August EBRI Issue Brief and ICI Perspective , was written by Sarah Holden, ICI senior economist, and Jack VanDerhei, Temple University and research director of the EBRI Fellows program. A copy is available athttp://www.ebri.org/ibpdfs/0804ib.pdf.