If the typical 401(k) participant will see a fourth consecutive year of gains, it will require making up for almost a 6% Q1 loss out of the gate.
After a relatively steady year of returns in 2021 and three straight years of positive returns, the Mid Atlantic Trust Company 401(k) Composite Benchmark started the year with a -5.78% return for Q1. The Benchmark’s performance in Q1 gave back all of the gains (and then some) that were realized in Q4 of 2021 when the typical 401(k) performance saw their 401(k) account increase by 5.47%. This performance reversal reflects the overall performance of the broader markets, which were hampered throughout the quarter amidst increased volatility brought on by rising interest rates, spiking inflation, ongoing supply-chain snarls, and the Russia-Ukraine war.
It has been a strong run for 401(k) participants over the previous five years. In four out of five years, the Mid Atlantic Trust Company 401(k) Composite Benchmark posted annual returns greater than 14%, with only 2018 providing a 6% negative return. For the hypothetical 401(k) investor*, even with the nearly 6% decline for the first quarter of 2021, that rate of return combined with an annual salary increase and a steady contribution rate means they would have nearly doubled their account balance during those five years.*
ABOUT THE MID ATLANTIC 401(k) BENCHMARK
Mid Atlantic Trust Company is a leading financial services organization that provides a wide array of brokerage, advisory, and trust services to a diverse national client base of financial advisors and institutions, asset managers, and benefits administrators through its various subsidiary companies. Because we provide these services, Mid Atlantic Trust Company has plan investment data on over 100,000 401(k) plans representing approximately $120 billion in assets. In response to requests from our institutional clients, we have created the Mid Atlantic Trust Company 401(k) Composite Benchmark. Using data from plans serviced by Mid Atlantic Trust Company with assets of at least $100,000 at the beginning and ending of the month, the Mid Atlantic Trust Company 401(k) Composite Benchmark is designed to reflect the portfolio performance across 401(k) plans serviced, in any capacity, by Mid Atlantic. See the “Methodology” section of this report for details on how the composite benchmark is calculated.
* For the hypothetical participant balances, we used a starting balance based on the average 401(k) participant balance provided by the Investment Company Institute for the Year of the starting balance. In our calculation, we assumed a starting annual salary of $50,000, a combined employee/employer 9% annual contribution rate, and a 3% annual salary increase and applied the monthly rate of return of the Benchmark.