4 Reasons Why an Average 401(k) Balance Doesn’t ‘Mean’ Much
In recent days, we’ve gotten updates on average savings rates and 401(k) balances, and while for the very most part the reports have been positive and “directionally accurate,” I’ve always taken such findings with a grain of salt. Not so many in the press. Indeed, the press coverage of those reports is generally quite negative, in the “how can people possibly retire on those small amounts” vein. Here are four things to keep in mind about those “average” 401(k) balances. Your average 401(k) balance may not be based on very many plans or participants. Some reports of plan design trends and average balances may do so based on a relatively small customer base, and/or homogenous plan size. That doesn’t mean the results are without value – but let’s face it, sample size matters in discerning trends. The average 401(k) balance in a universe of 50 plans is surely less instructive than one that is a hundred times that size. In all surveys, sample size matters. And when it comes to avera...