U.S. News’ Emily Brandon just released an article at Yahoo Finance titled, “5 Surprising Facts About IRAs”. The headline immediately caught my eye.
Aren’t IRAs straightforward tools for retirement investing?
Brandon shares 5 current IRA realities that I wasn’t aware of. Did you know that…
- The average balance is over $100k
- Over 40% of IRA contributors are putting in the maximum amount
- The majority of IRA contributions are 401k rollovers
- Roth IRAs are favored over their Traditional brothers
- IRAs are holding more now than during lows in 2010 and 2011
The average IRA balance is nearly $120,000. This number includes all surveyed accounts, regardless of investor age.
The median amount in IRAs shows a less rosy picture, with 45% of respondents having a balance of less than $25k. Did you see that… $25,000! **see the note on 401k rollovers below before you blow a gasket like I did.
According to a survey by the Employee Benefit Research Institute, more than 40% of IRA contributors are putting in the maximum allowable amount.
Does that fact surprise you too? Considering that 45% of people putting money into an IRA have an account balance of less than $25,000, how could it be that 40% are contributing the maximum amount?
This indicates that the majority of contributions are occurring closer to retirement. Sort of a “catch up” attempt for investors who were unable to contribute earlier in life.
The vast majority of IRA contributions are coming from 401k rollovers. The median amount of these rollovers was $27,967 (while the average was over $90,000).
This serves as a reminder that retirement savings come in many forms. It’s all too easy to look at one study and get all worked up about the state of American’s retirement accounts. Or, is it just me getting all worked up?
Roth vs. Traditional
In 2013 $6 billion was contributed to Roth IRAs vs $4.61 billion for traditional IRAs. This is encouraging news!
Roths are preferred over their traditional counterparts when the tax liability on retirement income is expected to be less than current income tax liability.
This statistic demonstrates that people are optimistic that they’ll be able to retire well. Hooray!
Investing for the Future
There’s no magic secret to creating a comfortable retirement; invest early and earnestly.
You might like to read about our recent retirement investment, or sign up below for the monthly newsletter and receive my FREE 7-step guide for Choosing a Fruitful Mutual Fund.
[yks-mailchimp-list id=”250ef74ea5″ submit_text=”Submit”]
You’ve got this investing thing in the bag! 🙂