Roth IRA investors more aggressive, make fewer withdrawals than traditional IRA investors: ICI
Most traditional IRA investors start with rollovers.
If you think there’s not much difference between Roth IRA investors and traditional IRA investors, two reports by the Investment Company Institute says you should think again.
The funds’ trade group used account-level data for millions of IRA investors from year-end 2007 through year-end 2014. Key findings:
• Roth IRA investors tend to be younger than traditional IRA investors. At year-end 2014, 31% of Roth investors were younger than 40, compared with 15% of traditional investors. Only 24% of Roth investors were 60 or older, compared with 39% of traditional investors.
• Traditional IRAs are usually opened by rollovers, while Roth IRAs tend to be opened by contributions. This partially explains why the young are more likely to have Roth IRAs.
• Roth investors tend to have higher stock holdings than traditional investors. Nearly 80% of Roth IRA assets were invested in equity holdings at the end of 2014, compared with less than two-thirds of traditional IRA assets. About 66% of Roth IRA assets were invested in stocks and stock funds, compared with 55% of traditional IRAs. (Investors also get some stock exposure through target-date funds and other hybrids.)
• Roth investors have fewer withdrawals than traditional investors. “In contrast to traditional IRAs, which require investors aged 70½ or older to take required minimum distributions (RMDs), Roth IRAs have no RMDs (unless the Roth IRAs are inherited),” the report says. In 2014, 4% of Roth investors made withdrawals versus 23% of traditional investors.
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