If you have an IRA, you (most likely) have a retirement plan. More than two-thirds of U.S. households with traditional individual retirement accounts said they have a strategy for managing their income and assets in retirement, according to a new Investment Company Institute (ICI) survey.
These households’ planning strategies include:
- Reviewing asset allocation (72 percent)
- Determining retirement expenses (67 percent)
- Developing a retirement income plan (65 percent)
- Setting aside emergency funds (57 percent)
- Determining when to take Social Security benefits (54 percent)
More than two-thirds of traditional IRA-owning households that indicted they have a strategy took three or more steps in developing it.
The study also found that traditional IRA-owning households sought information from a variety of sources when developing their retirement income and asset management strategy.
Among those households with a strategy, 74 percent consulted a professional financial adviser, 24 percent used a website, 24 percent consulted with friends or family, 22 percent consulted a book or article in a magazine or newspaper, and 7 percent used a financial software package.
Traditional IRA growth fueled by rollovers
The study also found that 59 percent of U.S. households with traditional IRAs in mid-2019, or 21 million U.S. households, had accounts that included rollover assets from employer-sponsored retirement plans.
When asked about their most recent rollover, the vast majority (86 percent) of these households reported that they had transferred the entire retirement plan account balance into the traditional IRA, rather than withdrawing any portion of the account.
Nearly nine in 10 traditional IRA-owning households with rollovers made their most recent rollover in 2000 or later, including 63 percent who made their most recent rollover since 2010.
Other key findings of the report include:
- More than one-third of U.S. households owned IRAs in mid-2019. More than 60 percent of all US households had either retirement plans through work or IRAs, or both. More than eight in 10 IRA-owning households also had accumulations in employer-sponsored retirement plans.
- More than one-quarter of US households owned traditional IRAs in mid-2019. Traditional IRAs were the most common type of IRA owned (owned by 28.1 percent of US households), followed by Roth IRAs (owned by 19.4 percent) and employer-sponsored IRAs (owned by 6.1 percent).
- Traditional IRA–owning households with rollovers cite multiple reasons for rolling over their retirement plan assets into traditional IRAs. The three most common primary reasons for rolling over were not wanting to leave assets behind at the former employer (25 percent), wanting to preserve the tax treatment of the savings (17 percent), and wanting to consolidate assets (17 percent).
The majority of traditional IRA withdrawals in tax year 2018 were made by retirees. Eighty-eight percent of households that made traditional IRA withdrawals were retired and only 5 percent of traditional IRA–owning households headed by individuals younger than 59 took withdrawals
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
