New research from the Employee Benefit Research Institute shows that the amount of new IRA dollars from rollovers led those from contributions by a 10-to-1 margin.
EBRI looked at a database of 14 million IRAs with total assets of $732.9 billion as of year-end 2008.
The annual IRA contribution limit is $5,000, or $6,000 for those age 50 or older, while rollovers have no such limit. Still, the size of this market should be instructive for fund firms, says Craig Copeland, senior research analyst at EBRI and author of the study.
“That’s a lot of money that’s in play annually for the investment companies to get,” Copeland says. “If you look, particularly as people get older, you’re talking about six-figure dollar amounts that I think would be very attractive.”
The EBRI database represents about one fifth of the total IRA market in terms of assets, according to Copeland. The group studied consists of 11.1 million unique individuals, or about one sixth to one seventh the total number of IRA participants, Copeland says.
Within that sample group, investors rolled over about $69 billion into IRAs in 2008, according to the study. By contrast, other new IRA contributions totaled $5.7 billion over the same period.
The size of the typical IRA rollover peaks among investors in their 60s. Rollovers from investors ages 60 to 64 totaled $16.3 billion, with an average of $137,451 and median of $55,000. Rollovers from investors ages 65 to 69 totaled $10.1 million, with an average of $137,035 and median of $51,755. The 55 to 59 and 70-and-older age cohorts also averaged six-figure rollover amounts.