Roth accounts grow faster than traditional IRAsNews added by Benefits Pro on May 22, 2014

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By Nick Thornton

Roth IRA accounts grew at more than double the rate of traditional IRAs between 2010-2012, according to analysis by the Employee Benefit Research Institute.

The median increase for Roth IRAs was 16.6 percent, compared to 7.9 percent for traditional individual accounts.

According to the EBRI analysis, a major factor in the difference was the larger percentage of Roth owners making contributions each year than they did in traditional accounts. New contributions made up a larger percentage in growth in Roth IRAs because, on average, their account balances are smaller.

Approximately 6 percent of traditional IRA owners contributed each of the three years tracked, and 10 percent contributed at least once. Among Roth accounts, 25 percent contributed each year, and 35 percent at least once.

The overall average balance of both types of IRAs was $106,205 in 2012, up from $95,431 in 2010. Increases occurred across all age groups surveyed, except for owners 70 and older, who are required to make annual withdrawals, and for traditional IRAs with balances originating from a rollover, due to tax consequences.

The EBRI database tracks data on 25.3 million accounts owned by 19.9 million individuals, representing assets of $2.09 trillion.

Other major findings in the EBRI IRA study, in EBRI’s own words:
  • The overall average IRA account balance in 2012 was $81,660, while the average IRA individual balance (all accounts from the same person combined) was $105,001. Overall, the cumulative IRA average balance was 29 percent larger than the unique account balance.

  • Rollovers overwhelmingly outweighed new contributions in dollar terms. While almost 2.4 million accounts received contributions, compared with the 1.3 million accounts that received rollovers in 2012, 10 times as much was added to IRAs through rollovers, compared with contributions.

  • The average individual IRA balance increased with age for owners ages 25 or older, from $11,009 for those ages 25-29 to $192,961 for those ages 70 or older.

  • IRA owners were more likely to be male. In particular, those with an IRA originally opened by a rollover, or a SEP/SIMPLE IRA were more likely to be male (57.4 percent of the former, and 58.2 percent of the latter).

  • Males had higher individual average and median balances than females: $139,467 and $36,949 for males, respectively, vs., $81,700 and $25,969 for females. However, the likelihood of contributing to an IRA did not significantly differ by gender within the database.

  • Younger Roth IRA owners were much more likely to contribute to the Roth IRA than were older Roth IRA owners: 43 percent of Roth owners ages 25-29 contributed to their Roth in 2012, compared with 21 percent of Roth owners ages 60-64.
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