IRA Allocations Vary By Age, Balance, and Type – But Not Gender
October 25, 2012
Those older, having higher account balances, or owning a traditional IRA that originated as a rollover had, on average, lower allocations to equities, according to the report, which notes that as account balances increased, the percentages of assets in equities (i.e., direct ownership, mutual funds, etc.) and balanced funds (including target-date funds) combined decreased, while bond (i.e., direct ownership, mutual funds, etc.) and “other” (i.e., real estate, annuities, etc.) assets’ shares increased.
Equity allocations for the youngest IRA owners (under age 35) with small account balances were the lowest across the age groups. However, when balances reached $10,000 or more, younger IRA owners had significant increases in equity allocations, such that those ages 25−34 with the largest account balances had the largest equity allocation.
“Those under age 45 were much more likely to use balanced funds than were older IRA owners, and those under age 35 with balances less than $25,000 had particularly higher allocations to balanced funds,” noted Craig Copeland, EBRI senior research associate and author of the report. “This shift follows the standard investing ‘rule of thumb’ that individuals should reduce their allocation to assets with high variability in returns (equities) as they age.”
These and other findings come from the latest update of the EBRI IRA Database, an ongoing project by EBRI that currently contains information on 14.85 million accounts of 11.1 million unique individuals with total assets of $1.002 trillion, as of year-end 2010. The EBRI IRA Database is able to provide a more complete assessment of cumulative IRA investments and activity by virtue of its ability to link the holdings of individual IRA owners both within and across data providers.