Employer Retirement Plan Rollovers Feed Traditional IRAs

And the owners of traditional IRAs rarely withdraw from their accounts, according to ICI data.

Fifty-eight percent of traditional individual retirement account (IRA)-owning households said that their accounts contained rollovers form employer-sponsored retirement plans in 2018, according to data from the Investment Company Institute (ICI).

As for the reasons why they conducted a rollover, 64% of IRA owners said it was to avoid leaving assets at a former employer. That was followed by preserving the tax treatment of the savings (60%), consolidating assets (54%) and having more investment options (54%). Forty-three percent of IRA-owning households made a contribution to their account in 2018.

“Traditional IRAs, which are the most common type of IRA, provide a vital tool for American workers to preserve and grow their retirement savings over their careers,” says Sarah Holden, senior director of retirement and investor research at the ICI. “The data show that a majority of these households have planned ahead, having developed a multi-component strategy for managing their assets and income in retirement.”

The study also found that traditional IRA-owning households rarely withdraw from their accounts and that most of the withdrawals are retirement related. Only 26% of these households took withdrawals in 2017. Eighty-five percent of households that made withdrawals were retired, and only 5% of households headed by individuals younger than 59 took withdrawals in tax year 2017.

One-third of U.S. households owned IRAs in 2018. More than eight in 10 IRA-households also made contributions to employer-sponsored retirement plans. More than 60% of all U.S. households had either a workplace retirement plan or an IRA, or both.

More than one-quarter of U.S. households owned traditional IRAs in 2018. Eighteen percent owned a Roth IRA, and 6%, an employer-sponsored IRA.

In 2018, the majority of IRA-owning households had incomes less than $100,000. Twelve percent had incomes less than $35,000, and 40% had incomes between $35,000 and $99,000.

More than two-thirds of traditional IRA-owning households say they have a strategy for managing income and assets in retirement.