Government Study Shines Light on IRAs: Popular and Ripe For The Picking

By Jeffery Levine, IRA Technical Expert  

Follow Me on Twitter: @IRAGuru4EdSlott

Yesterday the United States Government Accountability Office (GAO) released a study on IRA balances accumulated as of 2011. The report provides some fascinating information about the number of people who have IRAs, as well as the staggering amounts that some people have accumulated in them. While there are many points that can be taken away from the study, here are three that may be of particular interest.

1) The Government Realizes That IRAs Are Ripe For The Picking.  When discussing why the GAO did this study, here’s what they had to say: “In 2014, the federal government will forgo an estimated $17.5 billion in tax revenue from IRAs. Congress limited annual contributions to IRAs to prevent the tax-favored accumulation of unduly large balances, but concerns have been raised that tax benefits accrue primarily for higher-income individuals.”

Translation…

“Holy crap! We’re broke and look at all the tax revenue we’re losing because of retirement accounts! How the heck did all that tax-favored money get in there and how can we get our hands on it?” Make no mistake about it, Uncle Sam recognizes that IRAs and other accounts are big, juicy steaks, just waiting to be taxed. Given our country’s fiscal problems, it wouldn’t be a great leap to envision significant changes in the future aimed at curbing the benefits of these accounts.

2) There Are A Lot Of People With IRAs. The GAO report estimates that, as of 2011, there were almost 43 million different taxpayers that owned IRAs. That number has almost certainly grown since then and doesn’t even begin to tell the full story. The report only counted taxpayers with IRAs and not those with other tax-favored retirement plans, such as 401(k)s and 403(b)s. While there is generally no requirement to move funds out of these plans (other than required minimum distributions (RMDs)) during one’s lifetime, for a variety of reasons, many retirees choose to roll these funds over to IRAs after they’ve left their job – meaning that as the Baby Boomers continue to retire in record numbers, a similar affect on IRA growth can reasonably be expected.

3) Mitt Romney’s IRA Has Company! Back in 2012, while running for the office of the President of the United States, Mitt Romney’s IRA got a lot of attention. Although Romney, himself, never confirmed how much his IRA was worth, wide-spread reports put the total at between $25 million and $100 million. That’s quite the range and there’s obviously a big difference between $25 million and $100 million, but suffice to say, Mitt Romney has a lot more money in his IRA than most people, but…

He’s not alone. According to the GAO’s report, back in 2011, there were an estimated 314 taxpayers with IRAs of more than $25 million. There were another 791 taxpayers with IRAs between $10 million and $25 million and, altogether, close to 600,000 people with at least a $1 million dollars in their IRA. That translates to about 1.4% of the total IRA owning population – a relatively small percentage, but one that’s higher than many people might otherwise have expected.

For more on the GAO study, you can click here to download the full report.