Spectrem Identifies Rollover Opportunities

The amount of assets available for rollover increased 23% between 2007 and 2011, despite the financial crisis in 2008, a report by Spectrem Group found. Assets increased at an average annual rate of 5.3% since 2007.

Spectrem surveyed nearly 1,000 retirement plan participants with at least $5,000 in their accounts and found that of the eight million people who had an opportunity for a rollover, 26% had balances greater than $100,000, accounting for 72% of assets.

While the amount of assets available for rollover grew, the proportion of participants who rolled all or some of their assets in an IRA fell slightly to 52% in 2011 from 54% in 2007. Almost one-quarter left their assets in a former employer’s plan and 18% took a taxable withdrawal.

Taxable withdrawals have become increasingly unpopular over the past 10 years, according to Spectrem. The percentage of individuals taking a withdrawal fell from one-third to one-quarter between 2004 and 2007 and fell again to 18% in 2011. “Educating plan participants about the value of keeping their retirement savings inside some form of tax-qualified account to actually use in retirement appears to have been successful,” according to the report.

Baby boomers dominate the IRA rollover market in both assets and body count. Over half of respondents surveyed by Spectrem are 50 or older, and 78% of assets are owned by boomers.

Regardless of the trigger for a rollover—retirement, a job change, or simply consolidating assets from other plans—rolling assets into an IRA was by far the most popular option. However, following one of those triggers, retirees were more likely than job changers or consolidators to set up an income arrangement. The most common arrangement was to take systematic withdrawals, although 34% of retirees used the assets from their plan to purchase an annuity. Over one-quarter of job changers left their assets in an old plan, while 9% of consolidators took all or part of their balance as a taxable withdrawal.