Human Capital & Careers

Assets Surge in 401(k) Plans

Study says average account balance increased by 29.1 percent in 2003.
Stephen TaubAugust 12, 2004

“Thank you, stock market.”

That’s what most participants in 401 (k) plans seem to be saying after looking at their recent statements. The average ongoing 401(k) account balance increased by 29.1 percent last year, according to a recently published study by the Investment Company Institute (ICI) and the Employee Benefit Research Institute (EBRI).

That’s a sharp turnaround from the declines in recent years. Account balances increased across all age and tenure groups during the past year as a result of strong equity-market returns and continuing contributions, the study found. The report analyzes year-end 2003 data, which contains statistical information on about $776 billion in assets held by 15 million 401(k) plan participants in 45,152 plans. The EBRI/ICI project covers about 35 percent of all 401(k) participants in the nation.

Despite the gains, participants’ balances varied depending upon the workers’ age and number of years in the workforce. Of course, changes in account balances depend upon a number of factors, including contributions, investment returns, withdrawals, borrowing, and loan repayments.

The survey’s other findings included:

• The average balance for ongoing workers in their 20s rose 51 percent in 2003, to $23,888.

• For ongoing participants in their 30s, the average balance increased 38.6 percent in 2003, to an average of $50,937 at year-end.

• For those in their 40s, the average account balance increased 31.6 percent, to $82,999.

• For workers in their 50s and 60s, average account balances increased 24.5 percent and 14.9 percent, respectively, in 2003.

• The average account balance for all 401(k) participants holding accounts at least since 1999 increased 29.1 percent in 2003, to an average of $76,809, according to the report.

• Altogether, about 42 million U.S. workers took part in 401(k) plans in 2003, holding $1.9 trillion in asset.

Where are those participants investing? Increasingly in the stock market. Allocations to equity securities–equity funds, the equity portion of balanced funds, and company stock–increased to 67 percent of 401(k) assets at year-end 2003, from 62 percent in 2002.

On average, 45 percent of 401(k) participants’ assets were invested in equity funds (which include mutual funds and other pooled investments), 16 percent in company stock, 9 percent in balanced funds, 10 percent in bond funds, 13 percent in guaranteed investment contracts and other stable-value funds, and 5 percent in money funds.

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