IRAs outshine defined contribution plans

Assets in individual retirement accounts grew 16.5% in 2006 to a record $4.23 trillion, according to a new study released today by Washington-based nonpartisan Employee Benefit Research Institute. IRAs remain the largest repository of retirement funds in the U.S. — even higher then defined contribution plans such as 401(k) plans which held assets of $3.27 trillion in 2006. Meanwhile, private-sector defined benefit pension plans held assets of $2.26 trillion in 2006. Assets in IRAs have exceeded those in private-sector defined contribution and defined benefit plans each year since 2001. The growth in IRA assets has occurred mostly in mutual funds and self-directed brokerage accounts, the study found, with IRA market share shrinking for banks and thrifts. In 2006, 47% of all IRA assets were held in mutual funds. IRA growth continued to be fueled by rollovers from company-based retirement plans, which accounted for about $200 billion annually. New contributions to IRAs pale in comparison. The most recent Internal Revenue Service data, for 2002, showed that 90% of the assets in IRAs were in traditional IRAs, compared with 3% for Roth IRAs and just over 5% in other types of IRAs. The data is published in the December 2007 EBRI Notes.