Individual Retirement Account assets have overtaken assets held in 401(k) plans and 403(b) plans for the first time, according to a Cogent Research report.
While ownership of all three types of account are down from 2006’s participation, IRA ownership by affluent and high-net-worth individuals has fallen just 5%, compared to 23% of qualified retirement plans in the workplace.
The average wealthy investor now typically holds 31% of assets in IRAs, and 25% in an employer-based plan.
“We think job loss has something to do with it,” says Meredith Lloyd Rice, senior program director at Cogent in Boston. “But there are a number of things going on.” She points to an increase in forced early retirement but also a growth in the number of boomers starting their own businesses and rolling over assets in IRAs from the corporate jobs they left behind. Further slowing 401(k)s’ growth, fewer Gen X and Yers are enrolling, focusing instead on more immediate concerns, such as student loans.
Cogent doesn’t separate out traditional and Roth IRAs, and the data for this survey were gathered last October, before the income limits on Roth IRA participation were lifted, but Roth IRAs’ newfound attractiveness to wealthy investors will likely only add to IRAs’ dominance over 401(k)s.
“It’s a reason for advisors to reach out” to clients and prospects, Rice says. “Rollovers are top of mind for a lot of people, and the new Roth rules will only further highlight that in people’s minds.”
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