A Social Security cost-of-living adjustment could have a small but positive impact on retirement planning.
By Cyril Tuohy
The average contribution to an individual retirement account (IRA) reached a record $4,150 in the 2013 tax year, an increase of 5.7 percent from the previous year, according to an analysis of over 7 million IRAs by Fidelity Investments.
Average IRA balances shot up 9.9 percent to $89,100, the analysis also found.
Ken Hevert, vice president of Fidelity Investments, said in a news release that IRA contributions were up across all age groups, which indicates people are serious and committed to saving for retirement using tax-advantaged accounts.
“Saving more, paying off debt and spending less were the top three New Year’s financial resolutions cited in a recent Fidelity study and our IRA analysis indicates that Americans are taking those financial resolutions seriously,” Hevert said in a news release.
Investors 50 years old or older continue to save more than people younger than 50, and do so using traditional and Roth IRAs, the analysis found.
Average contributions to Roth IRAs outpace contributions to traditional IRAs on both ends of the age spectrum.
Overall average IRA contribution in the 2013 tax year for people 20 to 29 years old was $3,300. For investors 70 and older, it was $4,960, the analysis found.
Average IRA balances at the end of the 2013 tax year for people 20 to 29 years old was $9,600, up 3.2 percent compared to the 2012 tax year.
For people 70 and older, the average IRA balance at the end of the 2013 tax year was $177,700, up 8.2 percent compared to the 2012 tax year. Retirement balances last year swelled along with the soaring stock market.
The tax year begins on Jan. 1 and ends April 30 of the following year. The 2013 tax year began Jan. 1, 2013, and ended April 30, 2014.
IRAs are popular retirement-planning vehicles.
First created in 1974 under the Employee Retirement Income Security Act (ERISA), IRAs have grown to hold as much as $6.5 trillion in assets at the end of 2013, about one-quarter of the $22.7 trillion in U.S. retirement assets, according to the Investment Company Institute (ICI).
Last year, there were 46.1 million U.S. households, or 37.6 percent of all U.S. households, that owned one or more types of IRAs, the ICI said.
Surveys show investors like the portability, flexibility and investment choices that IRAs offer.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at email@example.com.
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