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Mixed March Results for 401(k)s Follow Strong Months

After a string of positive months for average 401(k) balances, the markets finally took their toll in March. The news comes after strong growth for defined contribution assets in the fourth quarter of 2014.

March Results

The average account balance of those aged 55-64 with more than two decades of tenure with their current employer slipped 0.7% in March, although the average account balance of those aged 25-34 with just one to four years of tenure crept up 0.6%, according to an analysis by the Employee Benefit Research Institute (EBRI) of the EBRI/ICI database.

Those gains, based on the actual contribution records and investment options of several million consistent participants in the EBRI/ICI database, were influenced by contributions and withdrawal/loan activity as well as investments.

Older, higher tenured participants tend to have larger balances, and the movement in average balance tends to be more influenced by market moves than contribution flows. On the other hand, the percent change in average account balance of participants in their 20s is more heavily influenced by the relative size of their contributions to their account balances. In fact, across the age spectrum, those with shorter tenures (and balances) eked out positive gains, apparently due to the weight of new contributions, while the average balances of those with five or more years of tenure lost ground.

Drawing from that database, which includes demographic, contribution, asset allocation and loan and withdrawal activity information for millions of participants, EBRI has produced estimates of the cumulative changes in average account balances — both as a result of contributions and investment returns — for several combinations of participant age and tenure.

You can access reports of both cumulative and monthly average account changes here.

Strong Fourth Quarter

ICI reports that total U.S. retirement plan assets were $24.7 trillion as of Dec. 31, 2014, with defined contribution assets registering the strongest percentage growth, according to a new report.

While total retirement plan assets were up 1.7% from the $24.2 trillion mark at Sept. 30, 2014, ICI says DC plan assets rose 2.1% in the fourth quarter, to $6.8 trillion. Meanwhile, federal, state and local government DB plans — held $5.2 trillion in assets as of the end of December, a 1.9% increase from the end of September.

IRAs remained the largest category, totaling $7.4 trillion at the end of the fourth quarter of 2014, an increase of 1.4% from the previous quarter — though a large amount of those IRA assets originated in workplace DC retirement plans. Private-sector DB plans held $3.2 trillion in assets at the end of 2014, with annuity reserves outside of retirement accounts accounting for another $2.0 trillion.

Retirement assets accounted for 36% of all household financial assets in the United States at the end of 2014, according to ICI.

Americans held $6.8 trillion in all employer-based DC retirement plans on Dec. 31, 2014, of which $4.6 trillion was held in 401(k) plans. Those figures were $6.6 trillion and $4.5 trillion, respectively, as of Sept. 30, 2014. In addition to 401(k) plans, at the end of the fourth quarter, $560 billion was held in other private-sector DC plans.