February 17, 2011

Fidelity Reports Year-End Spike in Roth IRA Conversions

Company says more investors look to minimize taxes in retirement

Fidelity Investments, the Boston-based money management behemoth, says nearly one-third of its Roth IRA conversions in 2010 occurred during the month of December. As expected, Roth IRA conversion activity was up all year, with the firm experiencing a fourfold increase in Roth IRA Conversions in 2010 as compared to the year prior.

New conversion rules meant demand for Roth IRA conversion advice and service hit an all time high, the company says. A provision passed in September 2010 as part of the Small Business Jobs Act of 2010 allows in-plan Roth conversions for certain eligible workers in a workplace savings plan with Designated Roth Accounts. This includes Roth 401(k), 403(b) and governmental 457(b) plans.

The company has seen growing demand by plan sponsors for the Roth 401(k) offering and the conversion opportunity. As of Dec. 31, 2010, 50% of large Fidelity-administered workplace savings plans now offer a Roth 401(k).

“For many investors, whether or not to convert to a Roth IRA is just the beginning of the discussion on potential ways to maximize their assets by minimizing taxes in retirement–and we expect these conversations to continue into 2011,” said Chris McDermott, senior vice president of investor education with retirement and financial planning, said in a statement.

Other key business data includes:

  • Total Conversions: Approximately 220,000 total Roth IRA conversions were completed in 2010, which represents more than a fourfold increase over 2009.
  • Age Analysis: Of the households that completed a Roth IRA conversion in 2010, 58% were customers age 50 or over.
  • Fidelity Roth Conversion EvaluatorUsage: More than 197,000 Roth Conversion Evaluator sessions were completed by investors and advisors in 2010, with 260,000 sessions since the calculator's launch in October 2009.
  • Fidelity.com Traffic: Visitors to Roth IRA conversion content on Fidelity.com nearly quadrupled in 2010, when compared to 2009. In fact, 62% of Roth IRA conversions in 2010 were completed online.
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