The average account balance of 401(k) plan participants having accounts consistently from year-end 2007 to year-end 2012 had a compounded average annual growth rate of 6.8% during the period, the Investment Company Institute and the Employee Benefit Research Institute said Thursday.
At year-end 2012, the average account balance for this group of participants was $107,053 vs. $77,049 at year-end 2007.
The research was designed to track the investing behavior of consistent participants, including the period encompassing the financial crisis, Sarah Holden, ICI’s senior director of retirement and investor research, said in an interview. This group’s average account balance dropped 34.7% in 2008, she said.
The increase in account balances incorporates employer and employee contributions, investment returns, and employee withdrawals and loans.
The gain in account balances for the consistent 401(k) participants dwarfed the results of a broader category of 401(k) participants, whose year-end 2012 average account balance was $63,929 vs. $65,454 at year-end 2007.
This broader group covers the consistent participants in 401(k) plans, as well as participants who left plans, moved their money to rollover individual retirement accounts and joined 401(k) plans in the middle of the survey period. It also included results from plans that started and terminated during the survey period.
The year-end results for this broader group simply “represents a snapshot” of account balance results, Ms. Holden said.
The research is based on an ICI/EBRI data base in which the broad 401(k) category represented 24 million participants and the consistent-participant group represented 7.5 million investors with account balances at the end of each year from 2007 through 2012, the last year for which data was available.