Americans nationwide are enjoying a powerful increase in IRA balances, according to a recent report from the Employee Benefit Research Institute (EBRI). The report, with the rather dense title of Individual Retirement Account Balances, Contributions, and Rollovers, 2013; With Longitudinal Results 2010–2013: The EBRI IRA Database, looked at information from 25.8 million individual retirement accounts, with 20.6 million different owners and $2.46 trillion in assets overall.
Working in investors’ favor are an ongoing bull market in both stocks and real estate. Bonds are also contributing modest but consistent returns in most segments. Overall, the last five years have been excellent for Self-Directed IRA investors:
At the beginning of 2014, the average IRA balance stood at $119,804, which represents a 30.4 percent increase from 2010 levels. The median account balance also increased by a similar magnitude, to $32,129.
These numbers include both Roth IRAs and traditional IRAs, and represent ‘rollover’ balances, which originated in other kinds of retirement accounts, such as 401(k) and SIMPLE IRA accounts, as well as funds organic to IRAs.
Only 13.8 percent of taxpayers contributed to an IRA in 2013, but that represents a modest increase over the tougher economic times of 2010, when 12.1 percent of Americans made contributions to their IRAs.
“The increases found in the average balances in 2013 are likely to continue, as is the importance of IRA assets for individuals during retirement,” said Craig Copeland, a senior research associate at EBRI. “With growing 401(k) plan balances and IRAs being a popular destination for 401(k) assets when people change jobs or retire, the amount of income derived from IRAs will grow significantly as a supplement to Social Security for the Baby Boom and Gen X generations.”
[tweetthis twitter_handles=”@iraexpert” hidden_hashtags=”#SelfDirectedIRA”]The last five years have been excellent for Self-Directed IRA investors[/tweetthis]
The report also found that individuals were contributing more to their IRAs: Average contribution levels increased substantially, from $3,335 to $4,145 in 2013. The number of people who actually contribute the maximum allowable $5,500 per year ($6,500 for those over age 50) actually fell from 53.5 percent in 2012 to 43.3 percent in 2013.
Those interested in reading the full report may do so by visiting www.ebri.org and downloading the May 2015 EBRI Issue Brief #414.
What Does This Mean for Self-Directed IRAs?
Self-Directed IRAs, including real estate IRAs, gold IRAs, private equity IRAs and other types of Self-Directed IRA strategies only account for a very small percentage of overall IRA assets. Of course, any asset class you use in a Self-Directed IRA strategy is going to be subject to the movements of the overall asset class. However, any study like this is going to be necessarily backward-looking. There’s already been a substantial run-up in the asset classes commonly used by conventional thinkers and typical IRA investors. The higher these balances go, the more it may make sense to diversify your large-cap US stocks, bonds, CD and money market holdings in IRAs into other kinds of assets. The higher things go, the more it makes sense to take some money off the table, diversify into areas in which you hold a market-beating competitive advantage over other investors, or otherwise protect yourself against a possible stock market or bond market correction, without pulling out of productive and even aggressive asset classes altogether.
American IRA, LLC is a leading administrator for Self-Directed IRA owners pursuing these kinds of strategies. Whether your focus is in real estate IRAs, precious metals IRAs, land banking, private lending, tax liens and certificates, private equity, venture capital or nearly any other asset class under the sun (you can’t hold life insurance, collectibles, alcohol or jewelry/gemstones within an IRA, but you can hold nearly anything else!), consider us a resource to help get you started, while in many cases saving you a tremendous amount of money on fees and expenses compared to the typical percentages charged by typical investment companies on IRA assets.
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