Stop the presses: IRA balances surge

Average totals up more than 50% since 2008, Fidelity says

Jul 26, 2013 @ 10:06 am

ira, retirement, roth, roth ira, fidelity
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Here's welcome news on the retirement savings front, courtesy of Fidelity Investments. Average balances on IRA saving accounts Fidelity administers reached over $81,000 at the end of 2012, a 53 percent increase from the end of 2008. Fidelity is one of the top providers of IRAs to investors.

The news was even better for older folks. Those in the 60-to-69 age bracket saw their balances rise 70 percent, to $127,800 from $75,000. It was up 81 percent for those ages 50 to 59, to $75,700 from $41,900.

The rising market of the last several years was a big help. The Standard & Poor's 500 Index rose 66 percent with dividends reinvested over the three years ended June 28, according to Bloomberg data.

The results are a rare bright spot amid the constant drumbeat of reports about how woefully unprepared Americans are financially for retirement. They also reinforce the mantra that consistent saving with a long-term horizon can pay off. You can contribute as much as $5,500 a year to your IRA, $6,500 if you're over 50. The average IRA contribution in Fidelity's analysis was $3,920 in 2012, so savers have a ways to go before hitting their annual contribution limit.

Fidelity also offered some stats on conversions from traditional IRAs to Roth IRAs. In a Roth, you pay the tax up front in exchange for tax-free gains forever. In 2012, Roth IRA conversions increased 12 percent year over year among the nearly seven million individual IRAs analyzed by Fidelity; in December, conversions jumped 52 percent in just one month, compared with the same period in 2011.

While some financial planners say Roth IRAs are a no-brainer, the right choice depends on factors including your age at the time you convert and your expected tax bracket in retirement. As Fidelity vice president Ken Hevert said in a press release about the analysis, "a Roth IRA also offers additional flexibility on when to take distributions since the accounts are not subject to required distributions at age 70 ."

(Bloomberg News)

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