February 12, 2013

IRA Rollovers to Hit Historic Highs as Boomers Near Retirement

Cerulli expects to see IRA rollover contributions surpass $450 billion by 2017—an opportunity for asset managers

Annual IRA rollover contributions should surpass $450 billion by 2017 as more baby boomers approach retirement age, Cerulli Associates reported this month.

In its report, the Boston-based global analytics firm analyzes current 401(k) plan participant behavior and finds that IRA rollovers will be a growing opportunity over the next five years for asset managers to capture assets.

“Rollover opportunities are increasing as baby boomers have started to reach retirement age,” said Alessandra Hobler, senior analyst at Cerulli, in a statement. “Rollovers into individual retirement plans from defined contribution plans were at $315.7 billion as of year-end 2012, and we expect that number to reach $450 billion in 2017.”

The Cerulli report, “Evolution of the Retirement Investor: Understanding 401(k) Participant Dynamics, and Trends in Rollover and Retirement Income,” includes insight into the pre-retiree demographic, and provides perspective into the factors affecting rollover transactions.

“Assets in 401(k) plans totaled $3.1 trillion in 2011, representing a significant opportunity for asset managers and other providers,” says the report’s executive summary. “For asset managers, the consistent contributions are particularly appealing and provide a source of positive flows even in poor markets when a firm may experience outflows from other segments of the industry.”

About 28% of participants identified a 401(k) provider to be their primary source of retirement advice.

 In a similar report published this January by management consultant AlixPartners, orphaned 401(k) assets were identified as an overlooked opportunity for advisors to add to their assets under management.

Ten percent of mass affluent investors moved their money last year, to the tune of $750 billion, while 27% of mass affluent investors admitted to holding anywhere from $100,000 to $500,000 in dormant assets in what AlixPartners managing director Teresa Epperson referred to as “orphan” 401(k) accounts.

“Financial institutions and their advisors should pay attention to retirement as a key theme,” Epperson said. “They should be talking more about this to their mass affluent customers because it’s a big, big opportunity.”

Read Advisors Targeting ‘Orphan’ 401(k)s Can Reap Big Rollover Rewards at AdvisorOne.

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