Spokane Journal of Business

Fidelity says average IRA balances hit five-year high

Total contributions have increased by 7.5 percent during four-year period

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Boston-based Fidelity Investments' analysis of nearly 7 million Individual Retirement Accounts, released last month, shows the average balance reached a five-year high of $81,100 at the end of tax year 2012, a 53 percent increase from the end of tax year 2008, when balances were the lowest during the period.

Additionally, total contributions to Fidelity IRAs have increased 7.5 percent from tax year 2008 to 2012, with the average IRA contribution reaching $3,920 in tax year 2012. Roth IRA conversion activity also jumped at the end of 2012as tax law changes were debated, which contributed to a 12 percent year-over-year increase.

In Fidelity's study, tax years end on April 30 of the following year. For example, tax year 2012 ended April 30, 2013.

"The five-year high balances tell us that investors remain committed to leveraging every option available to reach their retirement goals, and take control of their personal economy," says Ken Hevert, vice president of Fidelity Investments. "Age-appropriate asset allocation strategies, market appreciation, and annual contributions all played a part in driving balances higher. It's encouraging to see that investors are committed to using tax-advantaged vehicles to save more."

The findings from Fidelity highlight positive balance trends across all age groups despite even contribution levels.

Average IRA balances increased most precipitously for people in their 30s, rising 105 percent, to $20,700 at the end of the 2012 tax year from $10,100 in tax year 2008.

Increases for average IRA balances in other age groups include 60 percent for people ages 20-29, 90 percent for those in their 40s, 81 percent for people in their 50s, 70 percent for people in the 60s, and 49 percent for those 70 years old and older.

Total contributions to IRAs have increased every year since 2008, with a 3.1 percent increase in tax year 2012 compared with the previous year and a 7.5 percent increase compared with 2008.

As tax law changes were debated, Roth IRA conversions conducted by investors increased in 2012. There was a 12 percent year-over-year increase in Roth IRA conversions, and a dramatic 52 percent year-over-year surge for the month of December.

Overall, Fidelity conducted more than 101,000 Roth IRA conversions with investors in 2012. While not everyone can contribute to a Roth IRA because of IRS-imposed income limits, investors might be able to convert money in a traditional IRA or other retirement savings accounts to a Roth IRA.

"No matter what your age, we believe most investors should consider having a Roth IRA as part of an overall tax-smart retirement plan since earnings in a Roth IRA can grow tax free," Hevert says. "A Roth IRA also offers additional flexibility on when to take distributions since the accounts are not subject to required distributions at age 70 1/2."

Fidelity Investments is one of the world's largest providers of financial services, with assets under administration of $4.2 trillion, including managed assets of $1.8 trillion, as of May 31, 2013. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.

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