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January 02, 2003
IRA Assets Had 'Historic Drop' in 2001
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value of assets in individual retirement accounts (IRAs) declined to approximately $2.4 trillion in 2001, a reduction of more than $140 billion from their 1999 peak, according to new research by the nonpartisan Employee Benefit Research Institute.

It was the largest annual decrease in these assets since Congress created IRAs more than two decades ago, EBRI reports.

But while the drop in stock prices caused the decline, assets held in bank accounts or with life insurance companies increased from 1999 to 2001. IRAs now account for the largest share (22 percent) of the $10.69 trillion in total U.S. retirement assets.

More than 17 percent of Americans 21 or older, including nearly 21 percent of retirees, now own IRAs. This number grew steadily from 1996-2000 and correlates with family income, educational level, and age. IRA growth has been fueled by "rollovers" of assets from other types of retirement plans and investment gains; most IRA owners don't make a contribution in a given year, although those who do contribute tend to save the maximum allowable.

The December issue of EBRI Notes discusses trends in IRA assets and ownership. Some highlights:

- Total IRA assets increased annually between 1981 and 1999, failing to increase by double digits in only one year, 1994. IRA assets experienced their first two years of declines in 2000 and 2001.

- The portion of IRA assets in bank accounts fell steadily between 1982 and 1999, from 71.2 percent to 9.6 percent. Since 1999, it rebounded to 10.6 percent.

- IRA investments in mutual funds and brokerage accounts mirrors this trend, reaching a high of 80.8 percent in 1999. In 2001, 79.1 percent of assets were in such accounts. In 2001, 47 percent of assets were in mutual funds(down from a high of 48 percent in 1999) and brokerage accounts slipped to 32.1 percent (down from 32.8 percent two years earlier.)

- Nearly 22 percent of those who made a tax-deductible contribution in 1998 also made one in 1996 and 1997 and 51 percent contributed in one of those two years.

"Despite market declines, IRAs still tend to be invested in equities," said EBRI President and CEO Dallas Salisbury. "IRA owners have not significantly changed their behavior in response to falling stock prices."

EBRI is a private, nonprofit, nonpartisan public policy research organization based in Washington, D.C. Founded in 1978, its mission is to contribute to, to encourage, and to enhance the development of sound employee benefit programs and sound public policy through objective research and education.


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