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Four Times More People Contributing to Roth IRAs

The Employee Benefit Research Institute, which has the most extensive database of DC plans (with detailed information on more than 60,000 plans and 24 million participant records), also has a rich IRA database with more than 20 million records. As more money pours into both traditional and Roth IRAs, that pool of money becomes more important to watch, accounting for approximately 25% of all retirement assets — a percentage that’s growing.

Recently released research from EBRI shows more people contributing to their Roth accounts, especially younger people — though they’re doing so at lower levels. Some interesting IRA factoids from the report:

• 26.2% of Roth holders contributed in 2011 versus 6.1% for traditional IRAs, but the latter had higher average contributions.
• In 2010 and 2011, Roth assets increased 2.2% while traditional IRAs declined 2.0%.
• Traditional IRAs had the highest average account balances at $110,918, while Roths had the lowest at $25,228.
• 13 times more assets go into IRAs from rollovers than from contributions.

Understanding the data in DC plans and IRAs is essential for plan advisors — not only to know where we are but where we might be going. Clearly, EBRI is the leader in providing comprehensive and unbiased data and research, getting the data directly from the source via research funded by the industry at large.