Rollovers From Employer-Sponsored Plans Fueling IRA Growth: ICI

With $5.7 trillion in assets at the end of the second quarter, individual retirement accounts represented more than one-quarter of U.S. total retirement market assets, compared with 17% two decades ago, ICI says.

IRAs also have risen in importance on household balance sheets. In June 2013, IRA assets were 9% of all household financial assets, up from 4% of assets two decades ago. In May 2013, 46.1 million  U.S. households, or 38%, reported they owned IRAs.

Among all IRA-owning households in May, 84% also had employer-sponsored retirement plans; that is, they had defined contribution (DC) plan balances, current defined benefit (DB) plan payments, or expected future DB plan payments, ICI found. Another 29% of U.S. households reported employer-sponsored retirement plan coverage, but no IRAs. All told, ICI says that 67% of all U.S. households had some type of formal, tax-advantaged retirement savings.

Other key findings from the ICI survey include:

• Although most U.S. households were eligible to make contributions, few did so. Only 15% of U.S. households contributed to any type of IRA in tax year 2012, and very few eligible households made catch-up contributions to traditional IRAs or Roth IRAs. Among nonretired traditional IRA-owning households not making contributions in tax year 2012, 37% indicated they did not contribute to their IRAs because they were saving enough through their retirement plans at work.
• IRA withdrawals were infrequent and mostly retirement related. Twenty-one percent of traditional IRA–owning households took withdrawals in tax year 2012, the same share as in tax year 2011.
• The majority of traditional IRA withdrawals were made by retirees. Seventy-six percent of households that made traditional IRA withdrawals were retired. Indeed, only 8% of traditional IRA–owning households in 2013 headed by individuals younger than 59 took withdrawals. Sixty-six percent of withdrawals were calculated using the required minimum distribution (RMD)—this was the most common amount withdrawn.
• Traditional IRA-owning households not making withdrawals generally indicated they do not plan to tap their IRAs until age 70½. Sixty-six percent of traditional IRA-owning households not making withdrawals in tax year 2012 indicated it was unlikely they would withdraw from their IRAs before age 70½. The most commonly cited planned future uses of IRA withdrawals were to pay for living expenses and cover emergencies.