Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.
Data & Research June 8, 2017
IRAs Serving Their Purpose as a Savings and Rollover Vehicle
$7.4 trillion is currently invested in individual retirement accounts, the ICI reports.
Reported by Lee Barney
Individual
retirement accounts (IRAs) are serving their purpose as both a savings and a
rollover vehicle, according to the Investment Company Institute (ICI), which
has released details about the demographics and the savings behavior of IRA
investors.
“With $7.4 trillion in assets invested, traditional and Roth IRAs are
successfully meeting their dual mission as contributory savings vehicles and as
a place to transfer or consolidate assets from employer-sponsored retirement plans,”
says Sarah Holden, senior director of retirement and investor research at the
ICI.
Roth IRA investors tend to be younger, which the ICI attributes to the fact that only recently have the rules regarding
Roth IRA contribution limits, conversions and rollovers been eased. At
year-end 2015, 31% of Roth IRA investors were under the age of 40, whereas only
16% of traditional IRA investors are in that age bracket. Conversely, 25% of
Roth IRA investors were 60 or older, compared with 40% of traditional IRA
investors.
Eighty-five percent of traditional IRAs initiated in 2015 were opened with
rollovers, whereas 71% of new Roth IRAs were opened with contributions.
IRA investors tend to be committed to making contributions, the ICI says,
noting that more than 70% of those who made a traditional IRA contribution in
2014 did so again in 2015. Among Roth IRA investors, that percentage rose to
80%.
Roth IRA investors gravitate more toward equities than traditional IRA
investors, with 66% of Roth IRA assets in 2015 invested in equities. Roth IRAs
also had less allocated to bonds (7%) than traditional IRAs (16%). ICI says
this is likely due to the fact that Roth IRA owners are younger than
traditional IRA owners. This is probably also why only 4% of Roth IRA owners
made withdrawals in 2015, compared with 24% of traditional IRA owners.