Does this EBRI report predict future problems for retirees?
American Eagle Financial Services
The nonpartisan Employee Benefit Research Institute research report published May 21, 2014 has a lot of data, some showing that balances of Roth IRAs grew at more than double the rate of traditional IRAs among a consistent set of individual retirement account owners with the median increase for these consistent owners of Roth IRAs (mid-point, or half above and half below) being 16.6 percent from 2010 to 2012. However, the most striking data may not be the data that is the most telling.
The report classifies five types of IRAs, with three of particular interest for this article:
- Traditional-originating from contributions (TOFC),
- Traditional-originating from assets rolled over from other tax-qualified plans (TOFR)
- TOFC: 34.8 percent
- Roth: 22.7 percent
- TOFR: 28.6 percent (combined traditional IRAs, 63.4 percent)
- TOFC: 41.8 percent were individual
- Roth: 28.1 percent were individual
- TOFR: 34.2 percent were individual (combined total of 72.9 percent)
And while that doesn't seem particularly surprising, here’s what is surprising — and concerning. The report states the likelihood of contribution to an IRA did not significantly differ by gender within the database, as both Roth and traditional IRA owned by either males or females had similar probabilities of receiving contributions. But here’s the thing: Males had higher individual average and median balances than females; $139,467 and $36,949 for males respectively, versus $81,700 and $25,969 for females.
Why is this striking? A USA Today article states that during retirement, women earn less than men in benefits and retirement savings payments. The average woman over the age of 65 earns only $16,000, almost $11,000 less than a man in the same age bracket, according to the article. Factors affecting women accumulating assets for retirement:
- Women as stay-at-home caregivers
- Benefits depend on marital status
- Women live longer