Plan Rollovers Fuel Surge in IRA Growth

A new study finds growth in individual retirement accounts (IRAs) continues to be fueled by rollovers from employer retirement plans – about $200 billion annually – with new IRA contributions significantly smaller by comparison.

A news release from the Employee Benefit Research Institute (EBRI) said IRA assets exploded in 2006, with a whopping 16.5% hike to a record $4.23 trillion, an increase from $3.63 trillion in 2005. That 2006 performance gave more weight to the notion that IRAs are now the largest repository of U.S. retirement funds, according to EBRI.

Compared to IRAs, private-sector defined contribution plans in 2006 held assets of $3.27 trillion and private-sector defined benefit programs held $2.26 trillion in assets. EBRI said assets in IRAs have bested those in private-sector DC and DB plans each year since 2001.

According to the EBRI study, IRA asset growth has been mostly in mutual funds and self-directed brokerage accounts, with IRA market share shrinking for banks and thrifts. In 2006, almost half (47%) of all IRA assets were held in mutual funds.

Assets in IRAs saw 1990s annual growth of 17.2%, the release said. After a retrenchment during the recession of 2000 – 2002, IRA assets grew at annual rates of 18.2%, 9.7%, and10.6%, respectively. In 2002, IRA rollovers totaled $204.4 billion, following rollover totals of $225.6 billion in 2000, and $187.8 billion in 2001.

The EBRI report is available here.