Summary
Executive Summary
Individual retirement accounts (IRAs) represent the largest single repository of U.S. retirement plan assets, and are a vital component of U.S. retirement savings, holding one-quarter of all retirement plan assets in the nation. In response to this growing importance, the EBRI IRA Database was developed by the Employee Benefit Research Institute (EBRI) to analyze the status of and individual behavior in IRAs. This is the fourth annual IRA database study of longitudinal changes in IRAs, supplementing annual cross-sectional analyses.
This Issue Brief, using the EBRI IRA Database, specifically examines the trends in account balances, contributions, withdrawals, and asset allocation in IRAs from 2010-2015. Results from both the annual cross-sectional sample and a consistent sample of IRA owners who have been in the database in each year from 2010-2015 are presented. This allows for the investigation of the behavior in IRAs that are continuously maintained, instead of the results being affected by new and former IRA owners.
Account balances: Not surprisingly, results show significantly higher balances in the consistent sample of IRA owners compared with the annual cross-sectional sample. While the cross-sectional overall average balance increased 36.1 percent from 2010 to 2015, the increase for those IRA owners who continuously owned IRAs from 2010-2015 was 47.1 percent.
- For consistent account owners, the distribution of actual changes in the account balances was measured. The lowest 25 percent (regardless of age) had increases less than 0.1 percent since 2010. On the other hand, the highest 25 percent of balance increases exceeded 87.3 percent. Consistent Roth-IRA owners experienced a much higher distribution of increases, with the lowest 25 percent of balance increases for IRAs topping out at 29.7 percent, and the highest 25 percent exceeding 117.3 percent.
- For consistent account owners, the overall average balance increased each year including 2015—from $99,603 in 2010 to $99,960 in 2011, to $113,564 in 2012, to $134,781 in 2013, to $146,308, in 2014, and to $146,513 in 2015. Average balances for each gender also increased each year. The median values followed a continual upward trend across all IRA owner groups, except for those ages 65 or older.
Contributions: There were considerable differences by IRA type in the likelihood of consistent account owners contributing to the IRA and in the number of years contributions were made. Among Traditional IRA owners, 87.2 percent did not contribute to the IRA in any year, while 1.8 percent contributed in all six years. In contrast, 60.1 percent of Roth IRA owners did not contribute in any year and 9.7 percent contributed in all six years. Roth IRA owners ages 25-29 were the most likely to contribute in any year at 64.1 percent, and Roth IRA owners ages 30-34 were most likely to contribute in all six years at 15.0 percent.
- While the percentage of individuals contributing in each year remained relatively consistent across the six years, the percentage of contributors that contributed the maximum rose from 43.5 percent in 2010 to 53.5 percent in 2012. Increases during that time occurred for each IRA type, with owners of Traditional IRAs having higher likelihoods of contributing the maximum in each year. However, in 2013, with the increase in the maximum allowable contribution, the percentage contributing the maximum overall fell from 53.5 percent in 2012 to 43.3 percent in 2013. Similar percentage-point drops occurred for both Traditional and Roth IRAs. In 2014, the likelihood of contributing the maximum among those who contributed increased again, reaching 55.4 percent, before a slight decline in 2015 to 54.4 percent.
- The overall average contribution increased each year through 2013 before a slight decline in 2014 and a small increase in 2015. In 2010, the average contribution was $3,335, increasing to $3,723 in 2011, to $3,904 in 2012, and to $4,145 in 2013, before declining to $4,119 in 2014 and increasing to $4,169. This pattern of multiyear increases followed by a decrease in 2014 occurred in the average contribution for each known age and gender group of contributing owners of IRAs, except for those IRA owners ages 60 or older. In 2015, the average contribution increased in each age and gender group, except for those under age 25 and those who were female.
Asset allocation: For the annual cross-sectional snapshot, the percentage allocated to equities decreased from 45.7 percent in 2010 to 44.4 percent in 2011 before a sharp increase in 2012 to 52.1 percent, subsequent increases to 54.7 percent in 2013, and to 55.7 percent in 2014, then a decline in 2015 to 54.7 percent. The amount allocated to balanced funds was constant from 2010 to 2011 before a slight decline in 2012 and an even smaller uptick in 2013, 2014, and 2015, while the percentage in money increased in 2011 and fell through 2014 before leveling off in 2015.
- Among consistent account owners, the changes in the asset allocation from 2010 to 2012 were relatively small. For instance, the share of assets allocated to equities in 2010 was 44.5 percent and 46.4 percent in 2012, with a decline to 44.2 percent in 2011. However, after 2012, the percentage allocated to equities increased, reaching 53.1 percent in 2014, before a slight retrenchment in 2015 to 52.6 percent. The percentages allocated to bonds, money, and other assets all fell from 2010 to 2015, while the percentage allocated to balanced funds inched upward.
- Just over one-quarter (27.1 percent) of IRA owners in the consistent sample had zero percent allocated to equities in 2010 and 2015, while 16.8 percent had 100 percent allocated to equities in both years.
Withdrawals: Among consistent account owners, the percentage of individuals taking a withdrawal from a Traditional or Roth IRA rose from 14.6 percent in 2010, to 18.4 percent in 2011, to 19.6 percent in 2012, to 21.0 percent in 2013, to 22.6 percent in 2014, and to 23.8 percent in 2015. Furthermore, the percentage of consistent account owners ages 71–79 in 2015 who took a withdrawal increased from 34.4 percent in 2010 to 80.5 percent in 2015.
- This pattern is the result of the increasing percentage of individuals in this sample surpassing the required-minimum-distribution (RMD) age each year due to the sample size being constant from year to year. Moreover, the likelihood of taking a withdrawal increased with age.