The majority of dollars that wealthy investors formerly allocated to workplace-based retirement accounts like 401(k)s and 403(b)s are now being poured into individual retirement accounts, according to a report by Cogent Research LLC.
The report, "Investor Assets in Motion: IRA & Retirement Marketplace Opportunities," surveyed 4,000 affluent and high-net-worth Americans nationally and found that while ownership of both IRAs and employer-sponsored retirement plans has declined since 2006, ownership of 401(k) and 403(b) accounts have tumbled further.
Since 2006, IRA ownership has fallen by 5%, according to the report, while ownership of employer-sponsored retirement plans has plummeted by 23%. This marks the first time high-net-worth Americans are holding a larger proportion of their assets in IRAs than in other employer-based plans, with 31% using IRAs versus 25% holding assets in employer-sponsored retirement plans.
“The good news here is that while many Americans are losing access to 401(k) plans as a result of job separation, choosing to bypass their 401(k)s, or simply retiring they are making smart decisions regarding where to move their money – namely putting it in an IRA,” said Meredith Lloyd Rice, a senior research director for Cogent and author of the report.
When employees leave a company, their 401(k) is typically rolled into an IRA, and rolling an IRA into a new 401(k) can often be cumbersome and time-consuming.