IRA EXPANSION STUDY

AMERICAN CENTURY

IRA EXPANSION STUDY 2000

TABLE OF CONTENTS

Page

BACKGROUND AND OBJECTIVES 2

RESEARCH METHODOLOGY 3

SUMMARY OF KEY FINDINGS 4

DETAILED FINDINGS 5

COMPLETE QUESTIONNAIRE 9

DEMOGRAPHIC PROFILE 11

BACKGROUND AND OBJECTIVES

This past Spring, a coalition of approximately 180 legislators began serious discussions about increasing the Individual Retirement Account (IRA) annual contribution limit from $2,000 to $5,000. The contribution limit has stayed the same since 1981, in spite of 20 years of inflation and the advent of competitive retirement savings plans with higher contribution limits such as 401(k)s. In May 2000, American Century conducted the IRA Expansion Study to gauge the general public’s interest in IRA expansion measures. Specifically, the study looked at:

Public support for the new IRA expansion legislation
The impact of the higher contribution limit on the attractiveness of IRAs
The impact of the $5,000 contribution limit on investor behavior
Investment intentions of retirement savers if the limits are increased

The following report details the findings of the research.

RESEARCH METHODOLOGY

The American Century IRA Expansion study consisted of four questions that were included in a larger research study called CARAVAN. CARAVAN is a telephone survey conducted among a national probability sample of 1,000 adults 18 years of age and older, living in private households in the continental United States.

Interviewing for CARAVAN is completed 50 weeks per year, Thursday through Sunday. All data collection efforts take place at ORC International’s Central Telephone Facility, using state-of-the art computer assisted telephone interviewing (CATI) system. The most advanced probability sampling techniques are employed in the selection of households for CARAVAN telephone interviewing.

Completed interviews are weighted by four variables: age, sex, geographic region and race, to ensure reliable and accurate representation and reporting of the total population, 18 years of age and older. The use of replicable sampling, standardized interviewing procedures and representative weighting ensures that all CARAVAN studies are parallel to one another. Thus, CARAVAN usage is appropriate both for point-in-time analysis as well as tracking and trend comparisons.

SUMMARY OF KEY FINDINGS

The research suggests that there is broad public support for lawmakers to increase the annual contribution limit for IRAs from $2,000 to $5,000. In addition, the data indicates that the move would spur more retirement savings and investment among Americans.

Three-fourths of Americans (76%) believe their Congressperson should support legislation expanding limits for the IRA from $2,000 to $5,000.
Two-thirds (67%) suggest that increasing the limits would make the IRA more appealing as a retirement savings vehicle.
Of all Americans, 41% indicate they would save more for retirement with higher limits on the IRA — either by contributing to an IRA for the first time or contributing more to an existing IRA.
One-third (31%) of those who would either open an IRA or contribute more to an existing IRA would contribute the full $5,000.
Among those who would either open an IRA or contribute more to an existing IRA, two-thirds (70%) would contribute more than $2,000, the current allowable level.

DETAILED FINDINGS:

CONGRESSIONAL SUPPORT FOR IRA EXPANSION

Should your Congressperson support IRA expansion legislation?* …yes; no; don’t know

Three-fourths of Americans (76%) believe their Congressperson should support legislation expanding limits for the IRA from $2,000 to $5,000.

Support is even greater among:

People under age 65 (79%)
College graduates (87%)
Individuals with household incomes of $35,000 or more (84%)

* Question paraphrased; complete questionnaire in back

IMPACT ON IRA APPEAL

Would increasing the limits for IRA contributions make the IRA…much more appealing; somewhat more appealing; neither more nor less appealing; somewhat less appealing; don’t know?

Two-thirds (67%) suggest that increasing the limits would make the IRA more appealing as a retirement savings vehicle.

Those who would find it even more appealing include:

People between the ages of 35 and 64 (73%)
College graduates (79%)
Individuals with household incomes of $50,000 or more (79%)

IMPACT ON INVESTOR BEHAVIOR

If IRA limits increased, do you believe you would....start contributing to an IRA if you haven’t been doing so; contribute more to an IRA you already have; continue contributing about the same to an IRA you already have; don’t contribute to an IRA and don’t plan to; don’t know?*

Of all Americans, 41% indicate they would save more for retirement with higher limits on the IRA—either by contributing to an IRA for the first time or contributing more to an existing IRA.

College graduates (56%) and those with household incomes of $50,000 or more (57%) have an even higher likelihood of increasing their retirement savings

Of those indicating they already have an IRA, almost two-thirds (64%) say they would contribute more if the limits were raised

An additional 18% of Americans say they would begin contributing to an IRA for the first time if the limits were increased. Most likely to begin an IRA are young adults between the ages of 18 and 24 (33%)

* Question paraphrased; complete questionnaire in back

IMPACT ON AMOUNT INVESTED

Note: The base for this is 418 or the 41% of the 1,017 total respondents. This sample represents people who indicated they would contribute more toward retirement if the limits are raised.

How much do you think you’d contribute to the IRA each year?*…Less than $2,000; closer to $2,000; $2,500; $3,000; $3,500; $4,500; $5,000; don’t know

One-third (31%) of those who would either open an IRA or contribute more to an existing IRA would contribute the full $5,000.

Those more likely to contribute the full $5,000 include:

Pre-retirees --ages 45 to 64 (43%)
College graduates (39%)
Individuals with household incomes of $50,000 or more (48%)

How Much Would You Contribute Annually if the IRA Went to $5,000?
Less than $2,000	11%
Closer to $2,000	13%
$2,500	12%
$3,000	14%
$3,500	9%
$4,500	4%
$5,000	31%
Don’t Know	5%

* Question paraphrased; complete questionnaire in back

Complete Questionaire

American Century IRA Expansion Study

1 Congress is considering legislation that would expand limits for contributing to an Individual Retirement Account or IRA from $2,000 to $5,000 per year. Should your Congressperson support such legislation?

YES 76%
NO 13%
DON’T KNOW 12%

Base = 1,017

2 Would increasing the limits for IRA contributions make the IRA . . . (READ LIST)

Much more appealing 27%
Somewhat more appealing 40%
Neither more nor less appealing 16%
Somewhat less appealing 3%
Much less appealing 6%
DON’T KNOW 8%

Base = 1,017

3 If IRA contribution limits are increased to $5,000 per year, do you believe you would . . . (READ LIST. RECORD ONE ANSWER)

Start contributing to an IRA if you haven’t been doing so 18%
Contribute more to an IRA you already have 24%
Continue contributing about the same to an IRA you already have 13%
Or do you not contribute to an IRA and don’t plan to 39%
DON’T KNOW/NONE OF THESE 6%

Base = 1017

(ASK IF Q3 = 1 or 2)

4 How much do you think you would contribute to an IRA each year? Would it be . . . (READ LIST)

Less than $2,000 11%
Or closer to $2,000 13%
$2,500 12%
$3,000 14%
$3,500 9%
$4,500 4%
$5,000 31%
DON’T KNOW 5%

Base = 418

Demographic Profile

American Century IRA Expansion Study

Gender:

Male 48%

Female 52%

Age:

18 – 24 13%

25 – 34 19%

35 – 44 22%

45 – 54 17%

55 – 64 11%

65 + 18%

Household income:

Under $15,000 9%

$15,000 - $24,999 10%

$25,000 - $34,999 16%

$35,000 - $49,999 16%

$50,000 + 28%

Don’t know/refused 21%

Education:

Less than high school 9%

Completed high school 35%

Some college 22%

Completed college 30%

Don’t know/refused 4%