Saturday, August 04, 2007

How Is My 401K Doing?

As I perviously mentioned, EBRI just released their 401K survey for 2006. A couple of days ago I wrote a post about how lifestyle funds are becoming more popular in 401K plans. Today, I want to take stock of my own 401K situation and compare my performance with the data provided in the report.

I joined my company a little over 2 years ago and my current 401K balance is approximately $41,000. According to the EBRI report, my 401K balance is higher than about 65% of plan balances out there. This is where I pause, and pat myself on the back. Now it's time to get a bit more detailed, and compare my balance with that of my peer group.

I am in my mid thirties. Of people in my age group, 29% have less than $10,000 in their 401K accounts; 27% have between $40,000 and $50,000 and 11% have over $100,000. Interestingly, about 0.5% of employees in their 20s have 401K balances in excess of $100,000. Good for them. On the flip side, about 6% of employees in their 60s have account balances under $10,000. I guess some people are simply aching to become Wal-Mart greeters in their golden years.

Of people that have a tenure of 2 to 5 years with their employers, the group into which I fall, about 26% have account balances below $10,000; 15% have balances between $40,000 and $50,000; and about 4% have account balances above $100,000. Folks with 2 to 5 years of tenure who have over $100,000 must have either rolled over an old 401K plan into their current employer's plan; have been contributing aggressively for 4 or 5 years; or have been investing in something on steroids. In any case, good for them. Once again, it is interesting to note that about 8% of employees who have been with their employer for over 20 years still have less than $10,000 in their 401K plans. Repeat after me: "Welcome Wal-Mart Shoppers!".

Finally, according to the report, people in their 30s, who have been with their employers 2 to 5 years have on average $22,368 in their 401K plans. This is my specific peer group, and compared to this group, my 401K is doing spectacularly well. Steady as she goes, then.

To compare your own performance to that of the correct peer group, go to the EBRI report and take a look at figure 13 (page 18).

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