Account balances for workers who consistently held 401(k)s from 1999 to 2006 increased at an annual rate of 8.7%.
The average account balance for American workers who consistently held 401(k) accounts from 1999 to 2006 increased at an annual rate of 8.7%, according to a study released today.
The study released by the Washington-based Employee Benefit Research Institute (EBRI) and Washington-based Investment Company Institute show that average account balances for 401(k) participants rose to $121,202 at the end of 2006 from $67,760 at year-end 1999 for participants who maintained accounts for that entire period.
Among the same group, the median account balance increased to $66,650 at year-end 2006 from $24,898 at year-end 1999.
The average 401(k) account balance increased 17% in 2006.
The average 401(k) participant benefited from investing in equities in 2006, said study co-author Jack VanDerhei, Temple University and EBRI Fellow.
But he believes the more significant comparison is looking at long-term results.
"It looks very promising for those people who stay in a 401(k) plan for a continuous basis," he said.
"What I take away is the discipline of saving little by little through 401(k) plans workers can successfully save for retirement.
He added that workers who continue to save and invest in their 401(k) plans over the long run do well, despite the volatility of the stock market.
The agencies believe that tracking a consistent set of participants with accounts from 1999 to 2006 allows a meaningful analysis of changes in account balances over time.
The EBRI/ICI Participant-Directed Retirement Plan Collection Project includes 3 million “consistent participants,” each of whom held a 401(k) account at the same employer at least from year-end 1999 through year-end 2006.
The project’s database contains a snapshot of account information at year-end 2006 for 20 million 401(k) plan participants in 53,931 plans with more than $1.2 trillion in assets.
About two-thirds of 401(k) participants were invested in equities at the end of 2006, the report showed.
Meanwhile, the share of 401(k) accounts invested in company stock is shrinking, the analysis showed. It fell to 2 percentage points to 11% in 2006.
Recently hired employees are even less likely to hold company stock.