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 fifth 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 2010‒2016. 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 2010‒2016 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 35.0 percent from 2010 to 2016, the increase for those IRA owners who continuously owned IRAs from 2010‒2016 was 57.1 percent.
- For consistent account owners, the median balance change from 2010 to 2016 was an increase of 54.4 percent. These changes ranged widely: At the lowest (first) quartile of balance changes, an increase of just 0.2 percent or less over the period resulted compared with the highest (fourth) quartile of balance changes equaling or surpassing 108.6 percent.
- The median Roth IRA balance change was an increase of 85.8 percent for consistent account owners from 2010 to 2016 compared with 40.9 percent for all Traditional IRAs. A major factor in these different rates of increase was that new contributions (or conversions) made up a larger portion of Roth IRA balances than Traditional IRA balances, which magnified the impact of contributions.
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, 86.4 percent did not contribute to the IRA in any year, while 1.7 percent contributed in all seven years. In contrast, 58.0 percent of Roth IRA owners did not contribute in any year and 9.3 percent contributed in all seven years. Roth IRA owners under age 25 were the most likely to contribute in any year at 63.5 percent, and Roth IRA owners ages 25‒29 were most likely to contribute in all seven years at 14.6 percent.
- While the percentage of individuals contributing in each year remained relatively consistent across the seven years, the percentage contributing the maximum has varied, rising and falling periodically within a range of 43.5 percent and 55.4 percent.
- In 2010, the average contribution was $3,335, peaking at $4,145 in 2013, and declining to $3,938 in 2016. 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.
Withdrawals: Just under 24 percent of consistent account owners took a withdrawal in 2016; however, 36.1 percent took a withdrawal in at least one year of the 2010–2016 study period.
- The percentage of consistent account owners ages 65–70 in 2010 who took a withdrawal increased from 21.0 percent in 2010 to 77.9 percent in 2016. This is the result of the increasing percentage of these individuals surpassing the required minimum distribution (RMD) age.
- When comparing the withdrawn amount with the calculated required minimum distribution, approximately 30 percent of the IRA owners ages 71 or older withdrew an amount in excess of that required.
Asset allocation: Equity allocations peaked in 2014 at 55.7 percent and have since declined to 50.9 percent by 2016. In contrast, the amount allocated to balanced funds was at its highest level in 2016, at 13.2 percent, having previously ranged from 9.5 percent to 10.9 percent (between 2010 and 2015). For bonds, the allocation has declined from 19.9 percent in 2010 to 14.7 percent in 2016.
- Among consistent participants, equity allocations reached their highest levels in 2016, at 53.1 percent — up from 47.5 percent in 2010. Balanced fund allocations were also higher in 2016 than in previous years, at 11.0 percent. In contrast, bond allocations decreased from 15.1 percent in 2010 to 13.2 percent in 2016.