Majority of IRA owners hold “extreme” asset allocations, EBRI finds

Nearly 60% of IRA owners have their savings in an “extreme” investment allocation in 2012, meaning less than 10% or more than 90% in a particular investment category, according to a report by the Employee Benefit Research Institute (EBRI). The report, “IRA Asset Allocation, 2012, and Longitudinal Results, 2010-2012,” is the third examination of asset allocation from the EBRI IRA Database. It examines asset allocation on a dollar-weighted basis within IRAs by type and account balance as well as by gender and age of the account owner.

The EBRI report found that 23.7% of IRA owners have less than 10% in equities and 35.5% have more than 90% in equities. Furthermore, almost 1 in 5 IRA owners (18.5%) had more than 90% of their assets in bonds and money funds. Roth IRA owners had the highest equity positions, with more than 90% invested in equities. As the age of the IRA owner increased above age 55, the less likely the owners were to have more than 90% in equities. Those age 85 or older had a higher share of their assets in bonds or money funds.

Overall, looking at the results in the entire EBRI IRA Database in 2012, 52.1% of the assets were in equities, 9.5% were in balanced funds, 15.1% were in bonds, 12.8% were in money funds, and 10.6% were in “other” assets. When combining the allocation of balanced funds to the equity allocation, the total equity exposure of IRA owners was 57.8% of assets.

The EBRI report found that male and female IRA owners had virtually identical average allocations to bonds, equities, and money. However, males were more likely to have assets in the “other” category, while females had a higher percentage of assets in balanced funds.

Source: EBRI press release PR 1098, October 29, 2014.

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