IRA Asset Allocation

Abstract:     
Individual retirement accounts (IRAs) hold more than 25 percent of all retirement assets in the United States. A substantial portion of these assets originated in other tax-qualified retirement plans, such as defined benefit (pension) and 401(k) plans, and were moved to IRAs through rollovers. Thus, IRAs in many cases have become a repository for assets built up in the employment-based retirement system, as individuals hold money in them until or during retirement. EBRI collects data from IRA plan administrators, and its IRA database currently contains information on 14.1 million accounts of 11.1 million unique individuals with total assets of $732.9 billion, as of year-end 2008. In this database, 38.5 percent of the assets were in equities, 22.3 percent in money, 13.6 percent in bonds, 12.1 percent in balanced funds, and 13.6 percent in other assets. IRA owners under age 45 were more likely to be invested in equities and balanced funds combined than those over age 45. Those over age 45 were more likely to be invested in bonds and other assets. The percentage of assets in money across each age group was around 21 percent. This paper is the second in a series of publications analyzing the EBRI IRA Database.™ It examines asset allocation, on a dollar-weighted basis, within IRA accounts by IRA type and account balance and by gender and age of the account owner. In addition to presenting the average asset allocation across the accounts, this study determines the percentage of accounts that have extreme allocations -- less than 10 percent or more than 90 percent in a particular asset. This helps illustrate the distribution of the allocations across all accounts. This first step in the research of IRA asset allocation will be built upon in future studies by examining how IRA owners with more than one account allocate their assets across the accounts. The unique feature of this database is the ability to link accounts within and across data providers to see if IRA owners have different allocation strategies across the accounts or if they split their assets similarly across accounts.

The PDF for the above title, published in the May 2011 issue of EBRI Notes, also contains the fulltext of another May 2011 EBRI Notes article abstracted on SSRN: "Characteristics of the CDHP Population, 2005-2010."

Number of Pages in PDF File: 24

Keywords: Asset allocation, Individual retirement accounts (IRAs), Individual retirement account rollovers, Pension plan assets, Retirement plans, Savings Incentive Match Plans for Employees (SIMPLE), Simplified Employee Pension (SEP)

JEL Classification: D31, G11, G23, J10, J16

Accepted Paper Series