Most IRA Assets in Equities

May 24, 2011 (PLANSPONSOR.com) - New research from the Employee Benefit Research Institute (EBRI) IRA Database finds that almost 40% of IRA assets are invested in equities, just over 20% are in money funds, 12% are in balanced funds, and almost 14% are in other types of investments.

EBRI found as the account balance of the IRA increases, the percentage of assets in equities and balanced funds combined declines. For instance, among those IRAs with balances from $10,000−$24,999, 50.4% of the assets were in equities and 20.1% in balanced funds (70.5% combined), compared with 37.6% in equities and 11.7% in balanced funds (49.3% combined) for IRAs with account balances of $150,000−$249,999.  

The asset allocation of male and female IRA owners is very similar across all age groups.  For instance, females and males under age 25 had 49.1% and 49.5%, respectively, in equities, while women had 33.1% and men had 33.6% in equities among those age 70 or older. Furthermore, a decreasing percentage of equities and an increasing percentage of bond and other assets were found as age increased for both genders. 

As for extreme allocations (defined as having less than10% or more than 90% of the account balance in one particular asset), the research showed the most significant difference among the IRA types is that Roth owners are much more likely to have 90% or more of their assets in equities than those who own the other IRA types. Furthermore, Roth owners are correspondingly more likely to have less than 10% of their assets in bonds, money, or both.  

Traditional and SEP/SIMPLE IRA owners have relatively similar likelihoods of extreme allocations across the assets studied, while rollover IRA owners are much less likely to have 90% or more of their assets in equities and more likely to have larger allocations to bonds and money.  

IRA owners with higher account balances are less likely to have extreme asset allocations. For instance, 38.3% of those with an account of $5,000−$9,999 had 90% or more of their assets in equities, compared with 5.9% of those with an account balance of $250,000 or more. Furthermore, these accounts with higher balances are less likely to have less than 10% combined in money and bonds.  

The full research results are published in the May 2011 EBRI Notes, at http://www.ebri.org.

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