The IRA Investor Profile: Traditional IRA Investors’ Activity, 2007-2014

Abstract

Using data from year-end 2007 through year-end 2014, this report analyzes data on traditional IRA investors drawn from The IRA Investor Database to gain insight into how traditional IRA investors fared during and after the financial crisis. After setting the scene in terms of financial developments and regulatory changes affecting traditional IRAs, chapter 1 analyzes the contribution, rollover, and withdrawal activity among 4.9 million consistent traditional IRA investors (those with accounts at the end of each year from 2007 through 2014). In addition, this chapter explores changes in asset allocation and account balances among consistent traditional IRA investors. The remaining chapters of the report primarily focus on a snapshot of traditional IRA investors at year-end 2014. Chapter 2 discusses how contribution activity varied by investor age in 2014, exploring which traditional IRA investors had contributions and how many of them contributed at the limit. Chapter 3 notes that the vast majority of new traditional IRAs opened in 2014 were opened with rollovers, and examines rollover activity by investor age. Chapter 4 explores withdrawal activity, which varies significantly with investor age and in reaction to rules governing withdrawals. Few traditional IRA investors younger than 60 take withdrawals; traditional IRA investors taking withdrawals tend to be older and often take out the required minimum distribution (RMD) amount. Chapter 5 reports variation in traditional IRA balances by investor age. Chapter 6 compares snapshots of the asset allocation of traditional IRA balances among cross sections of traditional IRA investors at year-end 2007 and year-end 2014. Because some of the variation in asset allocation appears to be related to traditional IRA balance size, the asset allocation of balances of $5,000 or less are compared with the asset allocation of balances of more than $5,000. Smaller balances often have high allocations to money market funds or other cash instruments, which in part may reflect default investment rules for certain rollovers.

Keywords: Retirement, IRAs, Asset allocation, Investor behavior

JEL Classification: D14, G11, J26