At a Glance | April 16, 2020 Traditional and Roth IRAs: Patterns of Withdrawals and What They Suggest A look at whether individuals who own both a Traditional and Roth IRA are taking withdrawals in a way that takes advantage of the differing tax statuses of these IRA types. TRADITIONAL IRAS ARE THE MOST Source of IRA Withdrawals, by Year COMMON WITHDRAWAL SOURCE Traditional vs. Roth vs. Both, 2010–2016 Withdrawal Source When individuals own both 8.2% 9.4% 7.8% 8.2% 8.4% 8.4% 8.3% Both 100% Roth and Traditional IRAs, they 11.4% 9.9% 9.6% 9.0% 8.5% 7.6% 11.2% Roth IRA predominately take withdrawals 82.6% 83.2% 84.1% 82.3% 82.2% 80.4% 79.5% Traditional IRA from the Traditional IRA. This may be due in large part to IRS rules requiring withdrawals from Traditional IRAs after a certain age. 0% 2010 2011 2012 2013 2014 2015 2016 EVIDENCE OF LACK OF SENSITIVITY Source of Withdrawals, by Size of Account Balance TO OR AWARENESS OF TAX Traditional vs. Roth vs. Both, 2010 CONSEQUENCE S Withdrawal Source 13.7% 9.5% 7.5% 7.3% 7.3% 6.9% 6.1% Both 100% IRA owners with the largest 4.3% 20.3% 14.1% 10.8% 8.0% Roth IRA 25.5% 27.5% 89.6% balances were most likely to take 85.1% Traditional IRA 81.9% 78.7% 72.3% withdrawals from Traditional 65.0% IRAs over Roth IRAs. This is true 58.8% despite the fact that withdrawing from Roth IRAs would likely be more tax efficient for those with large balances. 0% $5k– $10k– $25k– $50k– $100k– $150k– $250k+ $9.9k $24.9k $49.9k $99.9k $149.9k $249.9k THE LARGER THE BALANCES, THE Number of Withdrawals From Traditional and Roth IRAs GREATER THE NUMBER OF Traditional vs. Roth, by 2010 Total Account Balance WITHDRAWALS TAKEN FROM Number of Withdrawals TRADITIONAL IRAS 48.1% 52.7% 57.6% 63.4% 67.0% 69.8% 74.8% No Withdrawals 100% Those with large balances were One Withdrawal 37.3% 34.1% also most likely to take multiple 29.7% 24.7% 21.5% 19.0% Two or More 14.7% withdrawals from their 14.6% 13.2% 12.7% 12.0% 11.5% 11.2% 10.4% Withdrawals Traditional IRA over their Roth 0% IRA. No Withdrawals 27.0% 27.2% 24.0% 18.2% 13.7% 10.2% 4.3% 100% 19.1% 12.8% One Withdrawal 21.5% 23.8% All of this points to the potential 26.8% 34.9% 30.5% 82.9% 70.7% Two or More 64.9% 58.0% Withdrawals need for education around tax 49.3% 42.3% 38.1% efficiency when there are multiple sources for withdrawals. 0% $5k– $10k– $25k– $50k– $100k– $150k– $250k+ $9.9k $24.9k $49.9k $99.9k $149.9k $249.9k SOURCE: Craig Copeland, “Withdrawal Activity of Individuals Owning Both Traditional and Roth Individual Retirement Accounts,” EBRI Issue Brief, no. 503 (Employee Benefit Research Institute, March 26, 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.