More Participants Plan IRA Rollovers in 2024

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.

“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.