The IRA Investor Profile: Roth IRA Investors’ Activity, 2007–2016

Abstract

This report analyzes data on a group of consistent Roth IRA investors — those holding accounts with the same financial services provider at the end of each year from 2007 through 2016 — drawn from The IRA Investor Database to gain insight into how Roth IRA investors fared during and after the financial crisis. In addition, it analyzes Roth IRA contributions, conversions, withdrawals, asset allocation, and account balances in 2016 by investor age. After setting the scene in terms of financial developments and regulatory changes affecting Roth IRAs, chapter 1 analyzes the contribution, conversion, rollover, and withdrawal activity for 2.2 million consistent Roth IRA investors (those with accounts at the end of each year from 2007 through 2016). The chapter also explores changes in asset allocation and account balances among consistent Roth IRA investors. The rest of the report focuses primarily on a snapshot of 5.9 million Roth IRA investors aged 18 or older at year-end 2016. Chapter 2 notes that the vast majority of new Roth IRAs opened in 2016 were opened with contributions. It examines contribution activity by investor age, exploring which Roth IRA investors had contributions and how many of them contributed at the maximum legal limit. Chapter 3 looks at how conversion activity varied by investor age in 2016, and briefly touches upon rollover activity, which is rare in Roth IRAs. Chapter 4 explores withdrawals, which very few Roth IRA investors take in any given year, likely discouraged by the five-year holding period and early withdrawal penalties. In addition, in contrast to traditional IRA investors, Roth IRA investors are not required to start distributions at age 70½ (unless the Roth IRA is inherited). Chapter 5 reports variation in Roth IRA balances by investor age. Chapter 6 compares the asset allocation of Roth IRA balances among cross sections of Roth IRA investors at year-end 2007 and year-end 2016, focusing on the changes in allocation to equity holdings by investor age.