IRA Assets Surpass 401(k) Assets

For the first time since Cogent Research has been tracking investor allocations, it says wealthy Americans now hold more assets in individual retirement accounts (IRAs) than in workplace-based retirement accounts such as 401(k)s and 403(b)s.

A new report, 2010 Investor Assets in Motion: IRA & Retirement Marketplace Opportunities, scheduled to be released next week by Cogent Research, indicates that while ownership of both types of retirement accounts is down since 2006, ownership of workplace-based retirement accounts have decreased much more dramatically. Since 2006, IRA ownership has slid by just 5%, while ownership of workplace-based retirement accounts has decreased by almost one quarter (23%), according to a release of findings. 

Cogent said it appears that the majority of dollars that investors formerly allocated to employer-sponsored retirement plans have been funneled into IRA accounts and, to a lesser extent, bank accounts. This shift has resulted in the proportion of assets affluent Americans hold in IRAs (31%) to surpass the proportion of assets they hold in 401(k) and other employer-based retirement plans (25%). 

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In addition, while fewer investors may have assets sitting in former employer retirement plans today (24% in 2009 vs. 31% in 2008), those who still do are even more likely to plan to rollover those assets into an IRA (45% in 2009 vs. 39% in 2008). 

Cogent also said an analysis of nineteen leading distributors reveals several big winners in the ongoing race to attract IRA assets. On average, over the past year firms managed to increase the proportion of primary client assets held in IRAs accounts by 15%.  

Besting their peers, seven firms were able to successfully increase the average proportion of primary client assets in IRAs by 20% or more: Fidelity, ING, Merrill Lynch, Raymond James, USAA, Vanguard, and Wells Fargo Advisors/Wachovia. Overall, nine firms hold one-third or more of their individual primary clients’ assets within IRA accounts: Ameriprise, Charles Schwab, Edward Jones, Fidelity, LPL, Merrill Lynch, Raymond James, UBS, and Vanguard. 

Cogent’s findings are based on a nationally representative sample of 4,000 affluent and high net-worth Americans.