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Investment retirement accounts (IRAs) represent the largest segment of the retirement savings market, with $17 trillion in assets. Rollovers from defined contribution (DC) plans remain the dominant source of funding for IRAs, accounting for 97% of traditional IRA inflows in 2022.

Understanding where this money is moving and why is critically important to the financial services industry. LIMRA estimates there will be $855 billion in retail rollover activity this year. By 2030, LIMRA projects the market to jump 34% to $1.15 trillion.

Growth in the IRA rollover market is directly connected to growth of the U.S. workforce, job turnover and retirements. LIMRA estimates between 60 and 70 million workers leave their employers each year, gaining access to their DC plan assets for rollover.  

Another driver of IRA rollover growth is the expansion of coverage for U.S. workers. According to the Employee Benefits Security Administration, the number of private-sector DC plans has grown nearly 20% in a decade. More than 750,000 plans are offered today, covering as many as 92 million workers.

Auto-enrollment and re-enrollments have boosted participation rates among workers whose employers already have DC plans. For big plans, Bureau of Labor Statistics participation rates rose from 58% in 2010 to 72% in 2024. For smaller plans, participation rate rose from 51% to 55%.

The IRA rollover market is also growing because the size of workers’ accounts is increasing. Since 2007, LIMRA estimates the average IRA rollover for people ages 50-74 more than doubled to over $220,000 in 2023/2024.

Timing Decisions

LIMRA research reveals 67% of investors began thinking about their decision prior to leaving their former employers. Among those who begin the decision process before leaving the employer, the decision to roll over DC assets typically occurs about three months before the worker departs. This suggests recordkeepers interested in retaining these assets need to build relationships before separation occurs.

According to LIMRA’s new study, investors with higher plan balances, higher household incomes and assets, and who are working with financial professionals are more likely to make decisions before separating (but not necessarily 90+ days before).

“For these individuals, in particular, control and choice are major motivators,” noted Matt Drinkwater, corporate vice president, LIMRA Annuity and Retirement Income Research. “Our recommendation is that any asset capture strategy should emphasize that sort of empowerment message of control — otherwise they may miss those very attractive potential customers.”

Key Decision Considerations

The study identifies four key factors that influence an investor’s decision to move their assets from a workplace plan to an IRA:

• Control over their assets was the number one response from investors. Investors also rolled out to seek better returns or more investment choices.

• Consolidation also was a priority for investors. They want their money in one institution, often overseen and recommended by their financial advisor, to make it easier to manage retirement savings.

• Convenience was important as well. Many investors suggested they liked the service they received at the company they chose. That could be easy-to-use apps or web platforms to self-serve or easier access to a human customer service rep.
• Fees were somewhat less commonly mentioned, but an important element for many investors.

What Attracts Investors to a Specific Firm?

The study examined why investors chose specific companies for their rolled balances. While consolidation tends to be the single most important reason, reputation, recommendations and convenience were also important, as well as investment costs and the opportunity for better returns. 

Service stood out as important. When companies offered personalized advice, easy-to-use digital planning tools and help with the transition, it mattered for investors deciding where to invest. Nearly two-thirds mentioned it, making it the second most important factor in their decision making. A downstream benefit of high-quality service is a strong brand and reputation. A company’s reputation, especially if established by a trusted source, can help to put a company onto the “short list” of potential rollover destinations.

Opportunity for the Annuity Sector

Today, less than 10% of investors and DC plan assets are being rolled over into annuities, despite workers’ acknowledged and growing need for guaranteed lifetime income.

“There is an emerging factor that may change the IRA rollover market considerably,” said Bryan Hodgens, senior vice president and head of LIMRA Research. “As more workers approach retirement without a pension and more opportunities are available to invest in an annuity within their DC plans, we could see more retired participants opt to keep their money in the plan and take distributions from that instead of rolling it out into an IRA.”

To learn more about the IRA rollover market, watch the latest Industry Insights With Bryan Hodgens episode: Control & Convenience: Understanding Investors’ Mindset With IRA Rollovers.