IRA Owners Are Maxing Out More While Contributions Remain Inconsistent
Most people who have individual retirement accounts do not make contributions every year. However, researchers at the Employee Benefits Research Institute found that over 50 percent of people who did contribute chose to pay the maximum amount. Their research showed that people who had an IRA for five years or longer were more likely to contribute.
IRA Contribution Trends
With traditional IRA
owners, more than 85 percent did not contribute anything during the first five
years. Of those who did contribute, only a small fraction contributed
consistently for each of the five years. With Roth IRA owners, about 60 percent
did not contribute anything during the five-year period. However, about 10
percent contributed for all five years. Roth owners who were in their 20s were
the biggest group of contributors.
The amount of IRA owners who contributed the maximum amount rose from just over
40 percent in 2010 to more than 50 percent in 2012. Increases were consistent
for each type of IRA. However, those who owned traditional IRAs were more
likely to contribute. By 2014, the amount of people who were more likely to
contribute the maximum rose to over 55 percent.
IRA Balances
The average account balance increased by about 40 percent between 2010 and 2014. Of those who maintained their IRAs for the entire period, the average account balance growth was more than 45 percent.
IRA Withdrawals
From 2010 to 2014, the percentage of people taking withdrawals from traditional IRAs increased by about 20 percent. This was due to people reaching the minimum distribution requirement.
IRA Asset Allocation From 2010 to 2014, the percentage allocated to equities ultimately rose to more than 55 percent from 45 percent. In 2011, the amount of money allocated increased but eventually fell a little bit by 2014.
Individual retirement accounts are the most popular form of retirement plan asset used in the United States today with more than 25 percent of the nation's retirement assets accounted for such plans. EBRI developed its database of IRA information to get a better look at IRA contribution behavior and patterns of use among participants. The information gathered and reported is used by IRA providers across the country to understand what consumers are doing and what changes must be made to benefit them.
For more information, feel free to Contact Neptune Financial to schedule an appointment.
Basic Understanding
This blog is being provided for informational or educational purposes only. It does not take into an investment objectives or financial situation of any individual, family, prospect, client, or prospective clients. The information is not written or intended as investment advice and is not a recommendation about managing or investing your retirement savings.
An individual seeking information regarding their investment or retirement needs should contact a financial professional.
Neptune Financial, and their financial professionals do not render tax and legal advice. Please consult your tax and legal advisors regarding your personal tax or legal concerns.
