401k Participants Do Rollovers Right

401k, rollover, retirement, ICI

Yay us!

A bit of good news about plan participant behavior.

New research finds the majority rollover assets from previous employers, rather than engaging in the far more tempting—and destructive—cash out.

Most U.S. households with traditional individual retirement accounts indicated their IRAs included rollovers from workplace retirement plans, according to a survey released today by the Investment Company Institute (ICI).

These rollovers allow investors to continue accumulating retirement savings when they change jobs over the course of their careers.

The study, “The Role of IRAs in US Households’ Saving for Retirement, 2018,” found that 58 percent of traditional IRA-owning households, or 19 million, indicated that their traditional IRAs contained rollovers from employer-sponsored retirement plans in 2018.

Traditional IRA owners cited multiple reasons for rolling over their retirement accumulations, including:

More than four in 10 traditional IRA-owning households with rollovers indicated that they also took advantage of contributions.

“Traditional IRAs, which are the most common type of IRA, provide a vital tool for American workers to preserve and grow their retirement savings over their careers,” Sarah Holden, ICI’s senior director of retirement and investor research, said in a statement. “The data show that a majority of these households have planned ahead, having developed a multi-component strategy for managing their assets and income in retirement.”

IRA Withdrawal Frequency Is Low

The study also found that traditional IRA-owning households rarely withdrew from their accounts and that most of the withdrawals are retirement-related.

Only 26 percent of traditional IRA-owning households in 2018 took withdrawals in tax year 2017, consistent with previous years.

Eighty-five percent of households that made withdrawals were retired and only 5 percent of traditional IRA-owning households headed by individuals younger than 59 took withdrawals in tax year 2017.

Other key findings of the report include:

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