About one-quarter of the 27.1 million workers participating in 401(k) plans have consistently done so for six or more years. These are workers who have maintained their accounts through the entire period of 2010 through 2016.

Representatives of the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI) parsed the data contained in the EBRI/ICI 401(k) database to determine how the accounts of these longer-term participants compare to the average 401(k) participant. Among the conclusions reached by the researchers, two stand out.

First, account balances, not surprisingly, are larger for consistent participants. The median account balance for those who have stayed in a 401(k) plan for at least six years was $82,338 at the end of 2016 versus $16,836 for all participants. There was also a large gap among balances when measured on an average basis: $167,330 versus $75,358. More than a quarter (26.4%) of those in the consistent group had more than $200,000 saved in their 401(k).

Second, tenure plays a big role in account balances. For all age groups, those with longer tenures had the largest account balances. The difference in the size of the account balances was more than double for those with tenures exceeding 20 years compared to those with tenures of just five to 10 years. While salary plays a role, the cumulative benefit of ongoing contributions and the capturing of long-term investment returns has a far bigger impact.

When all components affecting account growth—employee contributions, employer matching contributions, investment returns, withdrawals, loans and loan repayments—are considered, the median account balance grew at a compound annual average of 18.3% between 2010 and 2016. This number is higher than the return of the financial markets because of the impact that ongoing savings contributions have had on account balances.

In terms of asset allocation, consistent participants had a 46.3% allocation to equity funds and a 17.5% allocation to target date funds. This compares to 43.5% and 21.3% respectively for the entire EBRI/ICI database. Among all participants, target date fund usage was the highest among those in their 20s, accounting for 43.6% of their allocation. Though not specifically stated in the report, this may be due to the use of target date funds as the default option in 401(k) plans with an auto-allocation feature for new participants.

Source: “What Does Consistent Participation in 401(k) Plans Generate? Changes in 401(k) Plan Account Balances, 2010–2016,” by Sarah Holden, Jack VanDerhei and Luis Alonso; Investment Company Institute, November 2018.