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Retirement Planning > Retirement Investing

EBRI Finds Demographics a Key Factor in IRA Ownership

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NU Online News Service, June 25, 9:50 a.m. – Fresh insights into the characteristics of IRA owners came to light in research just released by the Employee Benefit Research Institute in Washington, D.C. Gender, race, age and other demographic factors were found to play a key role in whether individuals own an individual retirement account and how big their balance is.

The analysis focuses on all adult Americans, using data from the U.S. Census Bureau to examine IRA participation, contributions and withdrawals. Most past IRA research focused only on households, taxpayer units or workers rather than all adults, EBRI observes.

Assets held in IRAs reached $2.47 trillion in 1999, more than was held either in private trusteed defined-contribution retirement plans (such as 401(k) plans) or in traditional defined-benefit pension plans. Most IRA asset growth came from investment gains and rollovers from other tax-qualified plans such as 401(k)s and not from new contributions, EBRI says.

The June issue of EBRI Notes provides new statistics on the relationship of demographic characteristics and IRA ownership among all Americans age 21 and older. These data give a baseline for future comparison with IRA statistics from after the enactment of the Tax Reform Act of 1997 (TRA ’97), which increased the eligibility standards for deductible IRA contributions for some workers.

Among the article’s key findings:

– Approximately 16 percent of Americans age 21 and older owned an IRA in early 1997. The average IRA balance for those who owned one was $27,025 in 1996, and the average number of years IRA owners contributed to the account was 8.1 years.

– White Americans, males, married individuals and workers were more likely to own an IRA. EBRI found large differences in average contributions across age, race/ethnicity and monthly income.

– Black Americans had the lowest ownership rate and the lowest average account balances. While Hispanics also had low ownership rates, their average account balance was much closer to that of the white and other American race/ethnicity category averages. Monthly income did not seem to have a large impact on the average account balance.

–The likelihood of owning an IRA generally increased with age, monthly income and education. However, the oldest Americans’ ownership rate declined, particularly among those over age 70, whose ownership rate was lower than that of IRA owners ages 35-44 in 1996.

– In 1996, 3.9% of Americans age 21 and older made a deductible contribution to an IRA. The average contribution was $1,729; 65.9% made the maximum contribution of $2,000.

–The average account balances increased with age up to the oldest Americans before decreasing. Widowed individuals, males, non-workers (most likely retirees) and whites had higher average account balances than others in their categories.


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