How well has that 401(k) been working for you? As Nick Thornton writes in an interesting benefitspro.com piece, “updated research from the non-profit Employee Benefits Research Institute, a leading analyst of the defined contribution market, shows that savers who have been in the same plan since 2007 are making out quite well.” Other excerpts from his article:
“The new data differentiates participants in the EBRI database that have consistently stayed invested in one 401(k) plan since at least 2007.
“That database, which was designed in conjunction with the Investment Company Institute, tracks about 26.4 million participants.
“About 19 percent, or 4.2 million of those participants, held the same 401(k) account between the end of 2007 and the end of 2013. The EBRI/ICI analysts call them ‘consistent’ participants.
“The new report shows that consistency is clearly paying dividends.
“By the end of 2013, the consistent cohort had accrued larger account balances when compared to the overall cross-section of participants in the database.
“Nearly a quarter, or 23.5 percent of consistent participants had more than $200,000 in their 401(k) accounts at the end of the six-year period tracked, while only 10 percent in the overall database had as much.
“Another 18.8 percent of consistent participants had amassed between $100,000 and $200,000, compared to the 9.6 percent in the overall database.
“After six years of consistent participation, the average account balance was $148,399, more than twice the average balance of $72,383 in the entire database.
“The median balance was $75,359 with consistent participants, more than four times the median balance of the entire accounts tracked, which was $18,433.
“Overall, average balances of consistent savers experienced a 10.9 percent rate of annual compound growth between 2007 and 2013, in spite of the massive losses in 2008, when the average 401(k) balance fell more than 25 percent.
“Those increases blow away the annual gains experienced by the rest of the database. For all participants, the average balance was about $64,000 in 2007. By 2013, that average had only grown about $7,000, to an average of $72,383