Fidelity Sees Spike in Roth IRA Conversions

Fidelity Investments reports that nearly one-third of its Roth IRA Conversions executed across its retail and adviser businesses in 2010 occurred during the month of December.

Approximately 220,000 total Roth IRA conversions were completed in 2010, which represents more than a fourfold increase over 2009, the company reports.  

Awareness of the Roth IRA conversion opportunity has increased dramatically. A recent Fidelity survey of investors found a 25-point jump (40% vs. 15%) in awareness when compared to a similar study conducted in August 2009. This surge in awareness coincides with an increase in the number of investors who are looking for ways to minimize taxes in retirement (52% vs. 47%).   

Of the households that completed a Roth IRA conversion in 2010, 58% were customers age 50 or over.   

The announcement said more than 197,000 Fidelity Roth Conversion Evaluator sessions were completed by investors and advisers in 2010, with 260,000 sessions since the calculator’s launch in October 2009. Visitors to Roth IRA conversion content on nearly quadrupled in 2010, when compared to 2009; 62% of Roth IRA conversions in 2010 were completed online.


In-Plan Roth Conversions  

A provision passed in late September 2010 allowing in-plan Roth conversions for certain eligible workers in a workplace savings plan with Designated Roth Accounts (see "Over Roth?") has resulted in growing demand by Fidelity plan sponsor clients for the Roth 401(k) offering and the conversion opportunity, according to a Fidelity press release.   

As of December 31, 2010, 50% of large Fidelity-administered workplace savings plans now offer a Roth 401(k). Of those plans that offer a Roth 401(k) provided by Fidelity, approximately 7% currently now offer the ability to convert assets from non-Roth accounts within their plan.   

Results of a Fidelity survey mirror the business activity. More than half (53%) of workplace plan participants surveyed who had heard of a Roth 401(k) said their employers offer it as an option. Of those who indicated a Roth 401(k) was available within their plan, almost three-quarters (71%) were not sure if their employer offered the ability to convert existing assets to a Roth account within their workplace savings plan.