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Fidelity® IRA Balances Hit Five-Year High After Financial Crisis; Analysis Shows Greater Than 50 Percent Increase in IRA Assets
Surge in Roth IRA Conversions in 2012 as Tax Law Changes NearBOSTON – Fidelity Investments® today released its annual analysis of nearly seven million Individual Retirement Accounts (IRAs). The findings show the average balance reached a five-year high of $81,100 at the end of tax year 20121, a 53 percent increase from 2008 when balances were the lowest during the period2 Additionally, total contributions to Fidelity IRAs have increased 7.5 percent from tax year 2008 to 2012, with the average IRA contribution reaching $3,920 in tax year 2012. Roth IRA conversion activity also jumped at the end of 20123 as tax law changes were debated, which contributed to a 12 percent year-over-year increase.
“The five-year high balances tell us that investors remain committed to leveraging every option available to reach their retirement goals, and take control of their personal economy,” said Ken Hevert, vice president, Fidelity Investments. “Age appropriate asset allocation strategies, market appreciation, and annual contributions all played a part in driving balances higher. It’s encouraging to see that investors are committed to using tax-advantaged vehicles to save more.”
The findings from Fidelity, the No. 1 provider of IRAs to investors, highlight positive balance trends across all age groups despite even contribution levels:
Total Dollars Contributed to IRAs Rise and Average Contribution Holds Strong
Total contributions to IRAs have increased every year since 2008, with a 3.1 percent increase over last year and a 7.5 percent increase over 2008. At the same time, the average contribution held strong at $3,920 for tax year 2012 (vs. $3,930 for tax year 2011). Investors in their 60s continue to save the most in their Traditional and Roth IRAs. For tax year 2012, these investors contributed on average $4,910 to Traditional IRAs and $4,840 to Roth IRAs. Full contribution rates with age breaks are as follows:
Roth IRA Conversion Levels Increased
As tax law changes were debated, Roth IRA conversions conducted by investors increased in 2012. In fact, there was a 12 percent year-over-year increase in Roth IRA conversions, and a dramatic 52 percent year-over-year surge for the month of December. Overall, Fidelity conducted more than 101,000 Roth IRA conversions with investors in 2012. While not everyone can contribute to a Roth IRA because of IRS-imposed income limits, investors may be able to convert money in a Traditional IRA or other retirement savings accounts to a Roth IRA.
“No matter what your age, we believe most investors should consider having a Roth IRA as part of an overall tax smart retirement plan since earnings in a Roth IRA can grow tax free," said Hevert. “A Roth IRA also offers additional flexibility on when to take distributions since the accounts are not subject to required distributions at age 70 ½."
Fidelity IRA Guidance to Help Investors
Fidelity offers several educational tools and resources for investors at its online IRA Center that details the benefits of the different types of IRAs. The IRA Center has calculators available that can help determine how much investors may be able to contribute, how much might be tax-deductible or which type of IRA may be right. Fidelity also offers comparison guides that show differences between Traditional and Roth IRAs.
Additionally, the Roth Conversion Evaluator, which can be used online or with assistance from a trained Fidelity representative, can help investors determine whether or not a full or partial IRA conversion makes sense for them in context with an overall retirement plan.
Fidelity also offers points of view through its Viewpoints series on saving for retirement. Several recent articles include “How much do you need?” and “9 Reasons for a Roth.” A full listing of Viewpoints articles can be found at www.fidelity.com/viewpoints.
About Fidelity Investments
Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $4.2 trillion, including managed assets of $1.8 trillion, as of May 31, 2013. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.
1 January 1, 2012 through April 30, 2013