Individual retirement accounts, already a significant component of Americans’ retirement savings, continue to surge, according to a new report from EBRI.
With more than a quarter of U.S. retirement plan assets, according to the Federal Reserve, no wonder a growing number of advisors — and the Department of Labor — are taking a hard look at this rapidly growing pool of retirement assets.
While the percentage of individuals who contributed to their IRA was relatively consistent from 2010 through 2013, ranging from 12.1% in 2010 to 13.8% in 2013, the average account balance rose from $91,864 in 2010 to nearly $120,000 in 2013, an increase of more than 30% (and more than 14% from 2012 to 2013). And that growth came despite a dip from 2010 to 2011, according to “Individual Retirement Account Balances, Contributions, and Rollovers, 2013; With Longitudinal Results 2010–2013: The EBRI IRA Database,” a report from the nonpartisan Employee Benefit Research Institute (EBRI) drawn from the EBRI IRA Database, an ongoing project that collects data from IRA-plan administrators across the nation.
The median (mid-point) followed the same pattern, going from $25,296 to $23,785 to $32,179, representing increases of 27.2% between 2010 and 2013 and 15.0% between 2012 and 2013.
Roth IRAs
The growth rates for Roth IRA balances were higher, both overall and by age and gender. The median Roth IRA increase was 51.6% from 2010 to 2013, compared with 28.3% for traditional IRAs. A major factor in these different rates of growth was that new contributions make up a larger portion of the Roth IRAs than they do for traditional IRAs, which magnified the impact of contributions. Additionally, Roth IRAs aren’t subject to the required minimum distributions for those age 70½ and older, as are traditional IRAs. A substantial portion of these IRA assets originated in other tax-qualified retirement plans, such as DB and 401(k) plans, and were moved to IRAs through rollovers from those plans.
Among owners of traditional IRAs, the vast majority (88.6%) did not contribute to the IRA in any year. In contrast, fewer than two-thirds (62.6%) of Roth IRA owners did not contribute in any year, and 13.0% contributed in all four years studied. Roth IRA owners ages 25-29 were the most likely to contribute in any year and in all four years, at 59.9% and 20.8%, respectively. These percentages continued downward as the age of the Roth IRA owners increased.
Longitudinal Sampling
When examining the same individuals who were in the database each year from 2010 to 2013, the median percentage change in these individuals’ account balances was a 33.6% increase. At the 25th and 75th percentiles, increases of 2.6% and 57.1% resulted, according to the report.
The findings were published as part of the EBRI Center for Research on Retirement Income, drawn from the EBRI IRA Database. For year-end 2013, the database contained data on 25.8 million accounts owned by 20.6 million individuals and total assets of $2.46 trillion.
