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Study Says Most Have a Plan for Their Rollover

A recent survey finds that most households are rolling their entire retirement plan account balance into an individual retirement account, and that the vast majority claim to have a strategy for managing income and assets in retirement.

The Role of IRAs in US Households’ Saving for Retirement, 2016,” by the Investment Company Institute (ICI), found that 76% consulted a professional financial adviser when creating their strategy, 26% consulted a website, 24% consulted with friends or family, 23% consulted written materials, such as a book, magazine, or newspaper, and 10% used a financial software package. Two-thirds (67%) of households consulted multiple sources of information before making the move.

In 2016, 59% of all traditional IRA-owning households had traditional IRAs that included rollover assets, the study found. Households cited multiple reasons for rolling over accumulations from their employer-sponsored retirement plans to traditional IRAs:

  • 64% did not want to leave assets with their former employer

  • 63% said they wanted to preserve the tax treatment of the savings

  • 58% did so to increase investment options

  • 57% wanted to consolidate savings

When asked about their most recent rollover, the vast majority (82%) of these households transferred the entire retirement plan account balance into the traditional IRA. Nearly 9 out of 10 traditional IRA-owning households with rollovers made their most recent rollover in 2000 or later, including 74% whose most recent rollover was in the past 11 years.

Twenty-five percent of traditional IRA-owning households surveyed in 2016 had taken withdrawals in tax year 2015, and nearly 90% of them were retired. Most of the withdrawals were required minimum distributions (RMDs), which traditional IRA owners are required to take beginning at age 70½. Traditional IRA withdrawals were generally used for living expenses, reinvestment, home purchase or repairs, health care expenses or emergencies.