An analysis by the Investment Company Institute (ICI) provides insight into traditional individual retirement account (IRA) savings and withdrawal rates. The ICI found investors have largely maintained an allocation to equities. At the same time, there has been a decline in the percentage of investors making contributions and an increase in those taking withdrawals.

For its analysis, the ICI looked at the accounts of what it calls “consistent traditional IRA investors.” These are investors who have consistently owned a traditional IRA over the time span of 2007 through year-end 2013.

Equity allocations have been largely unchanged between 2007 (64.6% in 2013 versus 66.2% in 2007), with the exception of the youngest investors. Consistent traditional IRA investors in the 25 to 29 age group only had a 63.6% equity allocation in 2013 versus 73.2% in 2007. In comparison, those in the 70+ age group had a 60.8% allocation to equities (versus 60.5% in 2007). The ICI attributes the shift in allocations among young IRA investors to their small balances and rules requiring employers to roll over small 401(k) balances into investments “designed to preserve principal.”

In tax year 2013, 9.3% of consistent traditional IRA investors age 25 to 59 made a contribution to their traditional IRA. This compares to 10.6% in 2008. About 18.6% of these investors made at least one contribution between 2008 and 2013, with about one in five of this subset making a contribution every year.

Withdrawals were taken by 9.1% of traditional IRA investors in 2013 aged 25 to 29, up from 7.3% in 2007. Not surprisingly, 80.1% of investors aged 70 or older took a withdrawal in 2013, versus 78.0% in 2007. Median withdrawal amounts peaked at $11,830 for those aged 65 to 69 in 2013 before declining to $4,790 for those aged 75 and older. Just under 60% of investors who both were age 70 or older at year-end 2013 and owned a traditional IRA in both 2012 and 2013 took withdrawals based on the required minimum distribution (RMD) tables.

The median traditional IRA balance was $29,530 at the end of 2013, with a median balance of $2,980 for those aged 25 to 29 and $78,670 for those aged 70 to 74.

Source: “The IRA Investor Profile: Traditional IRA Investors’ Activity, 2007–2013,” Investment Company Institute, July 2015.

Related

Dispatches

Which IRA Should You Contribute to and When?

Dispatches

Considerations When Rolling Over a 401(k) to an IRA

Portfolio Strategies

Do's and Don'ts of IRA Investing