Washington (Aug. 13, 2004) -- The stock market seems to have been generous to many 401(k) plan participants in 2003 -- the average ongoing 401(k) account grew by 29.1 percent last year, the Employee Benefit Research Institute and the Investment Company Institute reported.

The average account balance for those who have maintained accounts at least since 1999 was $76,809 at the end of 2003, up 17.1 percent from the 1999 figure of $65,572 for an annual increase of about 4 percent, according to the EBRI/ICI 401(k) database, which tracks the behavior of about 15 million active 401(k) participants holding $776 billion in assets as of Dec. 31, 2003.

The EBRI and the ICI said that workers in their 20s saw their average account balance jump 138.7 percent between the end of 1999 and the end of 2003, largely because new contributions overwhelmed market activity. In contrast, the average account balance for workers in their 60s with 30 years of tenure declined 15.5 percent because market performance and withdrawals swamped new contributions.

About two-thirds of 401(k) account assets were invested in stocks at year-end 2003, according to the report. At year-end, 45 percent of participants' assets were invested in equity funds (which include mutual funds and other pooled investments), 16 percent in company stock, 9 percent in balanced funds, 10 percent in bond funds, 13 percent in guaranteed investment contracts and other stable value funds, and 5 percent in money funds.

The report, published in the August EBRI Issue Brief and ICI Perspective, was written by Sarah Holden, ICI senior economist, and Temple University’s Jack VanDerhei, research director of the EBRI Fellows program.

Beyond the market-driven changes, the EBRI and the ICI said that 401(k) plan participants didn't make any significant asset reallocations. Participants' allocations to company stock remained in line with previous years. And, similar to previous years, about 18 percent of eligible participants had loans outstanding at year-end 2003, with an average loan size of about 13 percent of the account balance (net of the unpaid loan balance).

-- WebCPA staff

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