Most traditional IRAs created through rollover contributions, ICI survey finds

Traditional individual retirement accounts (IRAs) continue to be opened predominantly with rollovers from employer-sponsored retirement plans, according to a study released by the Investment Company Institute, The study, “The IRA Investor Profile: Traditional IRA Investors’ Activity, 2007–2012,” shows that few Americans used the opportunity to contribute and save directly in IRAs in 2012.

“IRAs are a key component of the retirement landscape with a total of $6.2 trillion held in all forms of IRAs as of September 2013,” said Sarah Holden, Senior Director of Retirement and Investor Research. “And while in recent years most traditional IRAs are created through rollovers, traditional IRAs represent an important contributory savings vehicle, especially for workers without retirement plans through their employers.”

According to the ICI study, nearly nine out of 10 traditional IRAs opened in 2012 were opened with rollovers. In that tax year, only 8.4% of traditional IRA investors aged 25 to 69 contributed to their traditional IRAs.
The analysis also found that those individuals using traditional IRAs as a contributory savings vehicle show persistence in their contribution activity. For example, more than two-thirds of traditional IRA investors contributing at the limit in 2011 did so again in 2012.

Traditional IRA savers “stayed the course”

The ICI study also presented an analysis of 5.5 million consistent traditional IRA investors, which found that traditional IRA savers showed little reaction to the 2008 financial crisis. Although account balances fell considerably following the stock market decline in 2008, the average traditional IRA balance for traditional IRA investors aged 25 to 69 with account balances in all years between 2007 and 2012 was higher at year-end 2012 than at year-end 2007. The change in traditional IRA balances reflects contributions, rollovers, conversions, withdrawals, and investment returns.

Source: ICI news release, March 10, 2014.
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