Roth IRA balances grew faster than traditional IRA balances, EBRI study finds

Balances of Roth IRAs grew at more than double the rate of traditional IRAs among a consistent set of individual retirement account (IRA) owners over the three-year period from 2010–2012, according to findings released by the Employee Benefit Research Institute (EBRI).

Based on the latest results from the EBRI IRA Database, the median increase for these consistent owners of Roth IRAs (mid-point, or half above and half below) was 16.6% from 2010 to 2012, compared with 7.9% for consistent owners of traditional IRAs. The EBRI IRA Database tracks individual IRA owners with more than one account across multiple providers. For year-end 2012, the database contained information on 25.3 million accounts owned by 19.9 million unique individuals, representing total assets of $2.09 trillion.

The EBRI noted that a major factor in these different rates of increase was that new contributions make up a larger proportion of the Roth IRA balances due to the smaller average balances of Roth IRAs as well as the larger percentage of Roth owners making contributions each year than they do for traditional IRAs, which magnified the impact of contributions.

The EBRI also found that Roth IRA balances grew faster than traditional IRAs at each age group and for each gender. Looking at individuals who maintained an IRA account in the database over the three-year period, the overall average balance increased each year—from $95,431 in 2010 to $95,547 in 2011 and to $106,205 in 2012. This increase occurred across each owner age group and IRA type, except for owners ages 70 or older (who are required to start withdrawing a minimum amount each year from traditional IRAs) and for traditional IRA owners whose balances originated as a rollover from another tax-qualified retirement plan, such as a pension or 401(k) plan.

Source: EBRI press release PR 1077.

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