IRA Assets Climb to $13T, With Rollovers Fueling Growth

Assets held in individual retirement accounts reached $13 trillion in mid-2023, an increase from the $11.7 trillion held in mid-2022, according to the Investment Company Institute’s annual IRA report released Thursday.

IRAs are set to play an increasing role in U.S. savers’ retirement pictures, with four out of 10 households owning either a traditional IRA (31% of homes), a Roth IRA or an employer-sponsored IRA, according to the ICI. Those households often also have an employer-sponsored retirement plan account or a defined benefit plan.

As in prior reports, rollovers from workplace plans drove much of the contribution activity into IRAs, rather than direct contributions. In mid-2023, about 25 million U.S. households—62% of all homes with traditional IRAs—had IRAs that included rollover assets. Meanwhile, 86% of these households transferred the entire retirement plan account balance into the IRA, as opposed to only transferring part of it.

According to the ICI’s study, the three most common primary reasons IRA owners rolled over accounts were: not wanting to leave assets behind at a former employer (22%); wanting to consolidate assets (21%); and wanting more investment options (17%).

Financial Professionals Over Workplace

When it came to seeking advice in making a rollover decision, financial professionals won out as the primary source at 50%. Financial services firms (printed or online materials, seminars, workshops, phone representative) came in a distant second at 18%, and employers (printed or online materials, seminars, workshops) came in at just 13%.

When it came to making contributions, the ICI found that Roth IRA holders were more likely to do so than traditional IRA holders: 39% of Roth IRA households made contributions in tax year 2022, compared with 22% of traditional IRA-owning homes.

Although IRA use grew year-over-year, the ICI also reported an uptick in withdrawals in tax year 2022, rising to 31% of IRA households, the largest figure since its reporting began in 2007. That compared with 29% of households making a withdrawal in tax year 2021 and 23% making a withdrawal in tax year 2020.

The ICI made the point, however, that traditional IRA-owning households generally took “modest-sized amounts,” with more than half taking less than $15,000, and those often came as required minimum distributions. Younger households were also much less likely to make withdrawals than older households, according to the report.

“Traditional IRA–owning households tend to steward their IRA assets through retirement: traditional IRA withdrawals are infrequent, typically made by retirees, and generally started when required,” the report stated.

Among homes taking traditional IRA withdrawals during tax year 2022, 90% reported that someone was retired from their lifetime occupation, showing the funds being used for retirement income. The ICI also noted that a relatively large amount of retired households (46%) did not take withdrawals in tax year 2022.

Risk for Gain

The ICI also noted that mutual funds are still the dominant vehicle for IRA savings, used in more than seven out of 10 IRA-owning homes, with more than three in 10 holding exchange-traded funds.

“Our research finds that IRA-owning households report willingness to take some investment risk for financial gain,” said Sarah Holden, the ICI’s senior director of retirement and investor research, in a statement.

Overall, the report showed tax-advantaged retirement savings continue to be popular in U.S. homes, with some kind of plan in seven out of 10 households overall and in eight out of 10 near-retiree households.

Most traditional IRA-owning homes reported having a plan for their finances, with two-thirds noting they “have a strategy for managing income and assets in retirement,” the researchers wrote.

“Typically, these strategies have many components, including reviewing asset allocations, determining their retirement expenses, developing a retirement income plan, setting aside emergency funds, and determining when to take Social Security benefits,” according to the ICI.

The report, “The Role of IRAs in US Households’ Saving for Retirement, 2023,” was compiled from the ICI’s IRA Owners Survey, conducted in June 2023 from a representative sample of 3,255 U.S. households. It also leveraged the IRA Owners Survey, conducted on the KnowledgePanel, a probability-based online panel designed to be representative of the U.S. population.