401(k) Rollovers Fuel IRA Growth

Younger retirement savers prefer Roth IRAs.

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Most of the assets retirement savers have tucked away in IRAs are rolled over from other retirement plans. More than 10 times as many dollars were added to IRAs through rollovers in 2008 than from direct contributions, according to a new Employee Benefit Research Institute analysis of 14.1 million accounts holding $732.9 billion at the end of 2008.

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Retirement savers can contribute up to $5,000 to an IRA in 2010, or $6,000 if they are age 50 or older. But there is no limit on the amount that can be rolled over to an IRA from a 401(k), pension, or other retirement account after a job change or upon retirement. The average rollover amount was $74,785 in 2008, compared to an average individual contribution of $3,666.

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Account balances. The median IRA account balance is $15,756 per account and $20,046 per individual, when multiple accounts are included. Individuals with a rollover balance have the highest median balance of $31,264, while Roth IRA owners have the lowest median balance of $7,319. More than half (56 percent) of IRA participants have less than $25,000 saved.

New contributions. The average personal contribution to a traditional or rollover IRA is $3,798. Roth IRA participants contribute an average of $3,582. Approximately 42 percent of IRA account holders contribute the maximum amount.

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Traditional IRAs (34 percent) and rollover IRAs (33 percent) are the most popular individual retirement savings accounts. Roth IRAs make up almost a quarter of all IRAs and the rest are SEPs and SIMPLEs. Almost half of all IRA participants are approaching retirement age. Some 48 percent of account owners are between ages 45 and 62. Only 17 percent of traditional IRA owners are under age 45. Younger retirement savers primarily use Roth IRAs and rollover IRAs.