More Participants Plan IRA Rollovers in 2024

Cogent Syndicated by Escalent finds a jump in rollover intent among respondents interested in an IRA; a Human Interest survey, meanwhile, shows the need for care in retirement planning among participants.

More people plan to roll over money from their 401(k) accounts into individual retirement accounts in 2024 than did last year, according to an annual study by Escalent Inc.’s Cogent Syndicated division.

Almost nine out of every 10 (89%) defined contribution plan holders interested in an individual retirement account are likely to roll over this year, up from 82% in 2023, according to annual data released Wednesday in Cogent Syndicated’s ”DC Participant Planscape” report, which drew from a survey of 3,452 DC plan participants.

Sonia Davis, the report’s lead author and a senior product director for Cogent Syndicated, notes that IRA-curious Millennials are leading the charge toward rolling out defined contribution funds, showing an intent rate of 94% this year, as compared with 82% in 2023.

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“Millennials are hungry for information and want to know what their options are, and that is lending themselves to this market,” she says.

According to the survey, the reasons for the interest include job changes, a desire to consolidate accounts and a quest for lower fees. But former plan provider outreach and financial adviser recommendations are also playing significant roles, according to the researchers.

Rollovers and market returns have fueled IRA asset growth, with IRAs holding some $13 trillion in assets as of mid-2023, up from $11.7 trillion in the same period the year prior, according to the most recent data from the Investment Company Institute.

Adviser Effect

When it comes to advisers, Davis notes that nearly six out of every 10 people likely to roll over say they would work with a traditional adviser—up from 44% last year. That presents an opportunity for advisers, she says, but it is important for them to also see that participants tend to roll over into IRAs that have brand recognition and can show a track record of putting the investor’s interests first.

“We know that acting in a customer’s best interest is really instrumental to rollover IRA consideration,” she says. “Those are the things you want to be communicating and demonstrating in the market.”

Davis notes research from a retirement plan adviser trends study identifying the types of rollovers usually recommended by advisers. The breakdown showed 61% recommending IRA rollovers, 30% recommending rolling into their most current employer-sponsored retirement plan and the remaining 9% a mix of options, including some recommending sticking with the employer-sponsored retirement plan due to institutional pricing and access to plan features.

Move Carefully

Whatever participants do with their retirement savings, it will hopefully be informed and thought through—which, according to a separate Human Interest Inc. survey released Thursday, is not always the case.

In a survey of more than 1,000 working Americans conducted for the 401(k) plan provider by Censuswide, 83% of respondents had regrets about their retirement planning decisions.

Another 41% of those surveyed expect to retire later than planned due to recent financial circumstances, and 83% plan to continue working after retirement, according to the survey.

When it came to withdrawing funds from their 401(k) savings, 17% of respondents reported doing so through a loan, and 23% said they withdrew money before retiring from their jobs—though they may have withdrawn after the official age of 59.5 allowed by the IRS without tax penalty.

Either way, a fair share regretted the decision to tap their savings: 48% of loan takers regretted the move, and 60% regretted taking funds out before retiring.

Human Interest noted that employees with access to financial wellness programs are more likely to enroll in an employer-sponsored retirement plan: 91% of employees with financial education from their employer enrolled, while 76% without access to financial education enrolled.

The Cogent Syndicated study was conducted among 3,452 defined contribution plan participants in June; participants were required to be at least 18 years old and contributing at least 1% to a current plan or holding at least $5,000 in at least one former plan. The Human Interest research was conducted among 1,041 full-time employed Americans in July.

401(k) ‘Millionaires’ Hit Record

Fidelity’s 401(k) and IRA ‘millionaires’ are at record levels on strong markets and contribution, but separate surveying reveals millionaires still suffer from financial uncertainty.

Although the number of retirement-created millionaires has reached an all-time high, many of these individuals do not consider themselves “wealthy” and continue to have pressing questions about their financial future, according to recent studies.

In the second quarter of 2024, the number of 401(k) millionaires increased by 2.5% to 497,000 from 485,000 in Q1, while the number of IRA millionaires saw a 6% rise, reaching 398,594, compared with 376,275 in the previous quarter, according to Fidelity Investments’ update from its participant pool. These record milestones in 401(k)s and IRA holdings were achieved largely by those who began saving early and consistently contributed over many years, as outlined in Fidelity’s Q2 2024 retirement analysis.

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This marks the third consecutive quarter of growth for retirement savers’ assets, according to Fidelity. Although the growth in this quarter was smaller than in the previous two, the report stated the trend has been driven by strong contribution levels and favorable market conditions. This has led to the third-highest average account balance on record.

 

Q2 2024

Q1 2024

Q2 2023

Q2 2019

Q2 2014

IRA

$129,200

+1%

+14%

+17%

+40%

401(k)

$127,100

+1%

+13%

+20%

+39%

403(b)

$114,700

+2%

+12%

+29%

+57%

Notably, Generation X account holders made significant strides in their retirement savings, with current IRA contributions at the highest level observed in the past five years, Fidelity reported.

Millionaire Insecurity

Despite these gains among savers, only one-third (32%) of American millionaires consider themselves “wealthy,” and nearly half (48%) believe their financial plans need improvement, according to Northwestern Mutual’s “2024 Planning & Progress Study” released Wednesday.

Among the top concerns for millionaires—as defined by all assets held, though excluding pensions and employer-sponsored retirement plans—is the impact of taxes on their retirement savings.

The research showed that the No. 1 “burning question” among these individuals is: “How will taxes impact me?” After tax concerns, millionaires are wondering, “How much money will I need to retire comfortably?” and “Is it possible I could outlive my savings?” Accordingly, 61% of millionaires say they have a plan to reduce the taxes they will owe on their retirement savings.

In response to these retirement concerns, millionaires are pursuing various plans of action:

Plans of Action

 Millionaires (%)

Making withdrawals strategically from traditional and Roth accounts to stay in a lower tax bracket

44%

Using a mix of traditional and Roth retirement accounts

37%

Making charitable donations strategically, for instance: taking advantage of bunching itemized deductions

27%

Using a health savings account or other tax-advantaged health care account

24%

Using products like permanent life insurance or annuities for their tax benefits

24%

Making Roth conversions prior to taking RMDs or Social Security

23%

Using qualified charitable distributions from an IRA

22%

Making contributions to other tax-advantaged accounts like a 529

17%

Using the basis paid into the cash value of permanent life insurance to stay in a lower tax bracket

19%

Taking advantage of a qualified longevity annuity contract to set aside funds for later in retirement

17%

Many millionaires are turning to financial advisers to help navigate their concerns. Northwestern Mutual’s study found millionaires are significantly more likely to work with a financial adviser, with 69% doing so—more than double the rate of the general population (33%).

Fidelity’s insights were gathered from the firm’s quarterly analysis of more than 48 million IRA, 401(k) and 403(b) retirement accounts. Northwestern Mutual’s survey was conducted in early 2024 among 4,588 U.S. adults aged 18 or older.

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