A Generation Gap for Roth IRAs

Roth IRAs skew toward younger contributors, according to a report from the nonpartisan Employee Benefit Research Institute (EBRI).

A recent analysis of the EBRI database of individual retirement accounts (IRAs) revealed that nearly a quarter (24%) of the Roth accounts receiving contributions were owned by individuals ages 25 to 34. In contrast, only 8.9% of the traditional accounts that received contributions were owned by those in that age group.

IRA owners who are younger and own a Roth were more likely to contribute to it than older owners of the same type of account: 44% of Roth owners ages 25 to 29 made account contributions in 2011, compared with 21% of Roth owners ages 60 to 64.

Contributions to traditional IRA accounts did not significantly vary by age, as the percentage ranged from 9% to 6% for account owners up through age 64.

IRAs are a vital component of U.S. retirement savings, holding more than 25% of all retirement assets in the nation. A substantial and growing portion of these assets originated in other tax-qualified retirement plans, such as defined benefit (pension) and 401(k) plans. The EBRI IRA Database contains data from various IRA plan administrators on 20.5 million accounts owned by 17 million unique individuals with total assets of $1.456 trillion to study this ever-growing important source of retirement assets.

More information about “Individual Retirement Account Balances, Contributions, and Rollovers, 2011: The EBRI IRA Database” is available online here.