Roughly half of investors making contributions in 2013 in traditional individual retirement accounts contributed up to the new legal limit, the Investment Company Institute reported Tuesday.
The traditional IRA contribution limit in 2013 rose to $5,500 for taxpayers younger than 50 and $6,500 for those 50 or older, ICI said in “The IRA Investor Profile: Traditional IRA Investors’ Activity, 2007-2013.” Previously, those respective limits were $5,000 and $6,000.
Strikingly, the study suggests that retirement savers who contribute to traditional IRAs are paying serious attention to the rules governing their accounts, said Sarah Holden, ICI’s senior director of retirement and investment research.
“We found that in 2013, when contribution limits for traditional IRAs were raised for the first time in five years, nearly half of traditional IRA contributors reached the new legal limit,” Holden said in a statement.
There has been a shift in employer-provided pensions from defined benefit to defined contribution plans such as 401(k)s, the National Bureau of Economic Research reports, noting that a comfortable retirement rests on the “three-legged stool” of Social Security, employer-provided pensions and personal savings.
Frequently, those personal savings come in the form of traditional or Roth IRAs. And rollovers from employer retirement plans remain the main source of new IRAs, ICI says. About two-thirds of new traditional IRAs in 2013 were opened with rollovers.