Roth IRA 401(k)

Assets held in individual retirement accounts topped those in defined contribution plans by 41% at the end of 2016 — coming in at $7.85 trillion in IRAs versus $5.56 trillion in DC plans.

The IRA growth, according to a just-released report by Washington-based Employee Benefit Research Institute, “has been at least partially attributable to rollovers from assets built up in employment-based plans.”

(Related: The Backdoor Roth IRA: Investing Rules of the Backroads)

Consequently, “much of the assets from DC plans have ended up in IRAs, where individuals can draw them down to fund their retirement as necessary, or can at least withdraw the assets as required by the required minimum distribution rules,” according to the report, Individual Account Retirement Plans: An Analysis of the 2016 Survey of Consumer Finances.

The percentage of families who owned either an IRA or a Keogh plan increased in 2016 to 29.9% from 28.1% in 2013 and 28% in 2010, the report states, noting that this ownership rate was near the 2007 level of 30.6% but below the peak level of 31.4% in 2001.

Ownership of an IRA/Keogh increased with family income, the family head’s educational level, and the family’s net worth, according to the report: Of families with less than $10,000 a year in income, 5.2% owned an IRA/Keogh in 2016, compared with 59.3% of families with income of $100,000 or more.

EBRI notes that its survey is based on findings from the Federal Reserve’s triennial survey of wealth, the Survey of Consumer Finances.

Among families with an IRA/Keogh plan, the average value of the account was $203,904 in 2016, a 2% real increase from $199,934 in 2013.

From 1992–2016, the average IRA/Keogh balance increased 228%, from $62,147 (in 2016 dollars) in 1992, the report states.

The Survey of Consumer Finances categorizes IRA assets as Roth, rollover and regular IRAs.

Measuring the amount of IRA assets attributable to rollovers is important, the EBRI states, “in ascertaining the full impact of wealth generated within the employment-based retirement plan system, because rollover IRAs are primarily funded by assets generated in other types of retirement plans (notably DB plans or 401(k) plans).”

The most prevalent owned IRA type was regular IRAs at 29.8%, with “rollover only” at 23.9%, and the Roth at 22.6%.

Roth and regular IRAs owned together, the report states, “accounted for 9.0% of IRAs held by families; rollover and regular IRAs accounted for 6.1%; Roth and rollover IRAs, 5.3%; and rollover, regular and Roth IRAs, 3.3%.”

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