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ICI: Traditional IRA Holders Own More Annuities

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NU Online News Service, Sept. 17, 5:20 p.m. – Holders of traditional individual retirement accounts are more likely to own whole life insurance policies and annuities than holders of Roth IRAs are, according to a new report from the Investment Company Institute, Washington.

When ICI researchers analyzed results from the trade group’s annual tracking surveys, they found that the percentage of U.S. households owning Roth IRAs jumped to 12.1% this year, from 11.3% in 2001.

Ownership of traditional IRAs crept up to 32.7% of U.S. households, from 32.4%.

In some ways, the ICI researchers report, households that own traditional IRAs and Roth IRAs are similar.

Traditional IRA households, for example, have annual household incomes of $60,000, and 67% of the primary decisionmakers are married.

At Roth IRA households, the average annual household income is $65,000, and 66% of the primary decisionmakers are married.

Statistics on ownership of individual stocks suggest households in both groups have similar levels of risk tolerance: 58% of the Roth IRA holders own individual stocks, but so do 56% of the traditional IRA holders.

But “the financial decisionmakers of traditional IRA households generally were older and more likely to be retired than were the financial decisionmakers of Roth or employer-sponsored IRA households,” the ICI researchers write.

Traditional IRA holders had an average of $37,300 in IRA assets and $175,000 in total assets, while the Roth IRA holders had an average of only $12,400 in IRA assets and $100,000 in total assets.

Thanks, possibly, to the differences in age and asset levels, holders of traditional IRAs seem to do a great deal more business with life insurers.

The data for traditional IRA holders reveal that 51% own whole life insurance policies with a cash value, 12% have their IRAs at life insurance companies, and 28% own either fixed or variable annuities.

Meanwhile, only 42% of Roth IRA holders have whole life policies with a cash value. Only 6% have their IRAs at insurance companies, and only 16% own annuities.

The full report is available at //


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