Retirement Planning - By the Numbers

August 15, 2014

Do you find yourself concerned with the amount you have saved in your retirement plan? Is it not what you expected? If so, you are in good company. The nonpartisan Employee Benefit Research Institute research report published May 21, 2014 has a lot of data, some showing that balances of Roth IRAs grew at more than double the rate of traditional IRAs among a consistent set of individual retirement account (IRA) owners with the median increase for these consistent owners of Roth IRAs (mid-point, or half above and half below) being 16.6 percent from 2010 to 2012, among other findings.

The report classifies five types of IRAs with three of particular interest for this article;

  1. Traditional IRAs (TOFC),
  2. Roth
  3. Traditional rolled over from other tax-qualified plans (TOFR)

Where will your retirement income be distributed from, a traditional IRA, a ROTH IRA or a roll over from some other tax-qualified plan? This report showed that as of 2012 34.8 percent of came from a traditional IRA with 22.7 percent coming from a ROTH IRA. Are you part of this group of people who will receive your retirement income from one of these IRA's or are you part of the 28.6 percent the report shows received their retirement income from some form of other tax-qualified plan?

Should you speak with your trusted advisor to review how you will receive your retirement income since this report states together these plans represent 86.1 percent of classified IRA's? In fact on an individual basis 41.8 percent were individual IRA's with 28.1 percent of those coming from a ROTH IRA. Or could your trusted advisor help you decide if you should be part of the 34.2 percent of people who ultimately receive a retirement income from some other tax-qualified plans.

The report illustrates that the average and median individual IRA balances increased with the owner's age so your trusted advisor can help you ensure your balance does not end before your living needs do. People who meet with a trusted advisor to review their retirement plans on a regular basis find that over time they have a better funded plan. This report illustrated that the average and median balances for roll-over IRAs were higher than for each of the other plan types, particularly once the account owners reached age 40 and older. So by meeting with your trusted advisor yearly they can help you monitor your average and median balances.

As the report states "the likelihood of contribution to an IRA did not significantly differ by gender within the database..." meaning husbands and wives are equally affected by making or not making a contribution. The determining factor to you having a retirement that is secure by enough resources is to have a trusted advisor make sure an income gap will not create a retirement crisis at a time when you can least afford a change in your financial security. The time to make a change is before a change in circumstances requires it, isn't that true?

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