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August 11, 2004
Average 401(k) Account Balances Grew in 2003

The average ongoing 401(k) account grew by 29.1 percent in 2003, according to a nonprofit group that studies employee benefits.

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The Employee Benefit Research Institute (EBRI), which reports the finding in a joint publication with the Investment Company Institute (ICI), attributes the increase to two things: added contributions and growth in the value of the assets in the average account. 

The average balance for those who have maintained accounts at least since 1999 was $76,809 at the end of 2003, up 17.1 percent from the 1999 figure of $65,572--or an annual increase of about 4.0 percent, according to EBRI.

The age of the worker had a lot to do with the account balance, EBRI reports. The average account balance for a worker in his or her 20s jumped 138.7 percent 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 percent because market performance and withdrawals swamped new contributions.

Despite market volatility during this period, about two-thirds of 401(k) account assets were invested in stocks at year-end 2003, according to EBRI.  This allocation has changed over the years, reflecting stock price movements.  At year-end 2003, 45 percent of 401(k) plan 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 (GICs) and other stable value funds, and 5 percent in money funds.

These findings are contained in a new report from EBRI and ICI, using their database that tracks the behavior of about a third of all active 401(k) participants¾or 15 million participants holding $776 billion in assets as of Dec. 31, 2003.  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. Results are available on both EBRI's and ICI's Web sites, linked below.

Other findings from the 2003 EBRI/ICI 401(k) database include:

  • Beyond the market-driven changes, 401(k) plan participants do not appear to have made significant asset reallocations.

  • Participants' allocations to company stock remained in line with previous years

  • Similar to previous years, about 18 percent of eligible participants had loans outstanding at year-end 2003, and the average size of the loan was about 13 percent of the account balance (net of the unpaid loan balance).

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

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