EBRI Notes

"IRAs: Benchmarking for the Post-TRA '97 World" and "IRA Assets Grew by 23 Percent During 1997"

Dec 1, 1998 12  pages


IRAs: Benchmarking for the Post-TRA '97 World—Individual retirement accounts (IRAs) are once again in vogue as a result of the Taxpayer Relief Act of 1997 (TRA '97), which relaxed eligibility requirements for tax-deductible contributions to traditional IRAs and created two new forms of IRAs—the Roth IRA and the education IRA.  Financial institutions are once again aggressively marketing IRAs, and early indications are that these accounts are regaining popularity with savers. 

This article provides benchmark data from the pre-TRA '97 world of IRAs against which future data on IRA ownership, contributions, and asset levels (in the aggregate and cross tabulated by income and age) can be compared. These data are based on tabulations of a new dataset created by the Internal Revenue Service (IRS) that merges a sample of Form 1040 filings with the corresponding information form filings.

IRA Assets Grew by 23 Percent During 1997—Total assets held in individual retirement accounts (IRAs) reached a high of $1.9 trillion as of year-end 1997. Between 1996 and 1997, IRA assets grew 23.4 percent, compared with a growth rate of 16.7 percent between 1995 and 1996 and an average annual growth rate of 14.6 percent between 1981 and 1996. Most of the recent growth was due to rollovers from qualified retirement plans, not from new contributions to the accounts. Recent evidence suggests that distributions are increasingly likely to be rolled over into another qualified retirement vehicle, such as an IRA. Recently enacted legislation designed to encourage retirement savings may increase new contributions to IRA accounts in the future. The Small Business Job Protection Act of 1996 allows for larger tax-preferred contributions to IRAs for nonworking spouses.