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Q2 Off to a Good Start for the Average 401(k)

It’s been said that April showers bring May flowers, but April was mostly sunny skies for the average 401(k) balance.

US stocks slipped back on the last day of the month, but that was from record highs. The S&P 500 rose 5.2% for the month – its best monthly increase since November 2020 (nearly 11%), while the Dow climbed more than 2.5%, and the NASDAQ closed up more than 5%.  As for the “why” behind these records, companies comprising about two-thirds of the S&P 500 market capitalization have so far reported results, and 84% of these have topped estimates, according to data from Credit Suisse analyst Jonathan Golub.

As for the average 401(k), that of younger (25-34), less tenured (1-4 years) workers, was up 4.7% in April, on top of a 3.8% gain in March, according to estimates[i] from the nonpartisan Employee Benefit Research Institute (EBRI). The average 401(k) of older (age 55-64) workers with more than 20 years of tenure was 3.9% higher, on top of last month’s 3.5% gain. The groups often diverge in results — the older cohort’s average balance, being larger, is generally more influenced by market moves than contributions.

Year-to-date the younger cohort is up 11.8%, while the older, more tenured group’s average 401(k) has risen 7.5% so far in 2021.

Now as for those May “flowers”…

[i] EBRI’s analysis, based on the organization’s database of some 26 million 401(k) plan participants in more than 101,000 employer-sponsored 401(k) plans representing nearly $2 trillion in assets, is unique because it includes data provided by a wide variety of plan recordkeepers and, therefore, portrays the activity of participants in 401(k) plans of varying sizes—from very large corporations to small businesses—with a variety of investment options.