NEW YORK (MainStreet) -- Of nearly $25 trillion in total U.S. retirement accounts, more than $7 trillion is held in IRAs. A 40-year-old savings innovation, the venerable accounts are now nearly half comprised of mutual funds (48%), with a great deal of the assets coming from 401(k) rollovers.
So, how are these multi-layered and often restrictive retirement savings accounts doing? The Employee Benefit Research Institute has compiled four consecutive years of data on 25.8 million accounts with total assets of almost $2.5 trillion. The study shows a widely varying degree of savings success.
From 2010 to 2013 the average balance for those with IRA accounts during each of the years increased more than 32%. But nearly one-quarter of investors had increases of less than 3% over the same period. However, the highest quartile of balance changes exceeded 57%.
Roth IRAs saw even larger gaps in balance improvement. The lowest quartile of balance changes were over 26%, but the highest quartile account holders saw balances improve by more than 84%.
Investment performance – and probably more importantly, contributions – make the difference. Over that same four-year period, only about 11% of traditional IRA owners made annual contributions. But Roth IRA owners were better savers: 37% made contributions over the four-year period.
The Roth IRA is where the young money is going. Nearly one-quarter (23.9%) of Roth accounts receiving contributions were owned by individuals ages 25 to 34. A skinny 7.5% of traditional IRAs saw contributions from the same group of young adults.
Average annual contributions for all IRAs increased from $3,335 in 2010 to $4,145 in 2013.