At a Glance | September 24, 2020 Combined 401(k) Plan and IRA Balances by Age and Time Owning both a 401(k) plan and an individual retirement account (IRA) leads to larger balances, but missed opportunities to contribute and leakage reduce those balances. 1 COMBINED BALANCES SHOW Ratio of Average Combined Account Balances to Average 401(k) Plan Balance HIGHER GROWTH By Age Group When individuals own both 4.1x 4.0x 401(k) plans and IRAs, 71 or older 4x 3.5x balances are larger than when they just have a 401(k) plan. The 2.9x Under 30 3x youngest and oldest have the 2.6x 2.5x All Ages–401(k) highest ratios of combined Ages 40–49 2.3x to 401(k)-only balances. IRAs 2.2x 2x of older individuals likely represent 401(k) plan rollovers. 1x Initial Year 1st Year 2nd Year 3rd Year 4th Year 5th Year 6th Year SHARE OF 401(K) VS. IRA HOLDINGS Among Individuals With Both a 401(k) Plan and an IRA, the Majority of Assets Were Held in 401(k) Plans and Increased Over Time 401(k) plans represent the greatest portion of the 35% 32% 31% 30% 30% 29% 27% 100% combined account balances of IRA individuals, and increase as a 70% 70% 71% 73% portion of the whole over time. 69% 68% 65% This is presumably driven 401(k) Plan by the higher likelihood of contributions, higher contribution limits to 401(k) plans than to IRAs, and 0% Initial Year 1st Year 2nd Year 3rd Year 4th Year 5th Year 6th Year company matching contributions. EVIDENCE OF LEAKAGE Ratio of the Average 401(k) Plan, IRA, and Both Balances to Their Initial Year For Those Having Either Account Each Year and Both Account Types at Some Point While balances grow steadily for those with only 401(k) plan 2.5x balances or both account types 2.24x 401(k) Only throughout the period, those Both Every Year switching between account 2x 2.15x types (orange line) begin to see 1.59x Both at Some Point reduced balances. This is IRA Only 1.5x 1.58x likely due to cessations in 1.07x contributions and/or 1.04x withdrawals that indicate 1.03x 1.01x 1x 1st Year 2nd Year 3rd Year 4th Year 5th Year 6th Year leakage from the system. 1. 410(k) plan and IRA balances held each year. SOURCE: Craig Copeland, “Having Both a 401(k) Plan and an IRA: How Much Does This Change the Retirement Asset Picture?,” EBRI Issue Brief, no. 511 (Employee Benefit Research Institute, August 20, 2020). © 2020 EBRI This report is copyrighted by the Employee Benefit Research Institute (EBRI). You may copy, print, or download this report solely for personal and noncommercial use, provided that all hard copies retain any and all copyright and other applicable notices contained therein, and you may cite or quote small portions of the report provided that you do so verbatim and with proper citation. Any use beyond the scope of the foregoing requires EBRI’s prior express permission. For permissions, please contact EBRI at permissions@ebri.org.