Individual retirement accounts comprise 30% of U.S. retirement market assets and 11% of all household financial assets, which amounted to $7.3 trillion at the end of the third quarter of 2014. And just over one-third of all U.S. households — 41.5 million — had IRAs by the middle of 2014. In “The Role of IRAs in U.S. Households’ Saving for Retirement, 2014,” the Investment Company Institute (ICI) provides empirical evidence of how important a place IRAs have in retirement saving.
Having an IRA does not necessarily imply that a household does not have any other kind of retirement funds, ICI found. The study says that by the middle of 2014, more than 80% of U.S. households that had an IRA also participated in employer-provided retirement plans.
IRA withdrawals were infrequent, according to the report, and those that did take place were largely related to retirement and made by retirees. The most common amount withdrawn was calculated through the required minimum distribution. And the most common planned use for IRA withdrawals is to cover living expenses and address emergencies.
ICI attributed the growth in IRAs to rollovers from employer-sponsored retirement plans. It says that approximately 50% of the households that have traditional IRAs reported that their IRAs contained rollovers from employer-sponsored retirement plans. Eighty-one percent of those indicated they had rolled the entire retirement account balance into an IRA in the most recent rollover.
Why did they make those rollovers? The primary reasons were:
And the importance of rollovers may increase even more. Cogent Reports in its 2014 annual Investor Rollover Assets in Motion study says that the IRA rollover market — already a large component of the nation’s retirement savings — could see another surge in the next 12 months.
Cogent found that 51% of affluent investors with a balance in a former employer-sponsored retirement plan (ESRP) expects to move their money into a rollover IRA in the next 12 months. That, coupled with an increase in the number of investors with more than $100,000 in investable assets, could mean a potential $382 billion transferring into IRAs this year, according to the report.
Having an IRA does not necessarily imply that a household does not have any other kind of retirement funds, ICI found. The study says that by the middle of 2014, more than 80% of U.S. households that had an IRA also participated in employer-provided retirement plans.
IRA withdrawals were infrequent, according to the report, and those that did take place were largely related to retirement and made by retirees. The most common amount withdrawn was calculated through the required minimum distribution. And the most common planned use for IRA withdrawals is to cover living expenses and address emergencies.
ICI attributed the growth in IRAs to rollovers from employer-sponsored retirement plans. It says that approximately 50% of the households that have traditional IRAs reported that their IRAs contained rollovers from employer-sponsored retirement plans. Eighty-one percent of those indicated they had rolled the entire retirement account balance into an IRA in the most recent rollover.
Why did they make those rollovers? The primary reasons were:
- wanting to consolidate assets;
- not wanting to leave assets behind at a former employer; and
- access to more investment options.
And the importance of rollovers may increase even more. Cogent Reports in its 2014 annual Investor Rollover Assets in Motion study says that the IRA rollover market — already a large component of the nation’s retirement savings — could see another surge in the next 12 months.
Cogent found that 51% of affluent investors with a balance in a former employer-sponsored retirement plan (ESRP) expects to move their money into a rollover IRA in the next 12 months. That, coupled with an increase in the number of investors with more than $100,000 in investable assets, could mean a potential $382 billion transferring into IRAs this year, according to the report.
- Log in to post comments