IRA asset allocations vary by age, not gender

IRA asset allocations vary by age, balance and type, but the difference between genders is minimal, according to a new report by the Employee Benefit Research Institute.

Older individuals with higher account balances or who own a traditional IRA that originated as a rollover had, on average, lower allocations to equities. The report notes that as account balances increased, the percentages of assets in equities and balanced funds decreased, while bond and other asset shares increased.

Equity allocations for the youngest IRA owners (under age 35) with small account balances were the lowest across the age groups. When balances reached $10,000 or more, younger IRA owners had significant increases in equity allocations.

“Those under age 45 were much more likely to use balanced funds than were older IRA owners, and those under age 35 with balances less than $25,000 had particularly higher allocations to balanced funds,” said Craig Copeland, EBRI senior research associate and author of the report. “This shift follows the standard investing ‘rule of thumb’ that individuals should reduce their allocation to assets with high variability in returns (equities) as they age.”

Roth IRAs were found to have the highest share of assets in equities (59.1 percent) and balanced funds (15.5 percent). Traditional IRAs that originated from a rollover had the lowest percentage in equities at 41.3 percent, but also had the highest percentage of assets in money (12.8 percent) and the highest percentage in bonds.

Roth IRA owners were also much more likely to have 90 percent or more of their account invested in equities than owners of the other IRA types. IRA owners who also were ages 35 to 44 or had account balances of less than $10,000 were more likely to have extreme allocations (more than 90 percent) to equities.

Overall, as of year-end 2010, about 46 percent of total IRA assets were in equities, 20 percent in bonds, 11 percent in balanced funds, 9 percent in money, and 15 percent in “other” investments.


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