They are a Huge Opportunity That is the word that one CEO used
to describe his credit union's approach to the newly expanded IRA contribution
limits. These limits go up 50% or 75% next year depending on whether the contributor
is over 50 years old. Ultimately the maximum contribution will be $6,000 per
year for a person over 50 years of age or $12,000 per couple, that is 300% greater
than the current $2,000 and $4,000 limits.
For the CEO of this credit union, which has a 100% loan-to-share ratio and
a below average retirement plan at its main sponsor, the other "huge" factor
was the experience that IRA accounts tend to be long-term savings.
However, most credit unions are not seeking more savings, are uncertain what
to do with the funds should they come in and therefore are doing nothing special.
This caution could be a mistake. Here's why:
- Credit union IRA CD and money market options are viewed in a much more favorable
light since the stock market's reversal;
- The over 50 segment can contribute at the higher of the new limits, is generally
the most loyal group of current members and tends to prefer less risky investments
for their IRA choices;
- IRAs are becoming the single largest pool of self-managed retirement savings
today with total $2.7 trillion in assets or over $1 trillion larger than all
401(k) and other defined contribution plans. Credit unions generally are not
an option in 401(k) plans, but have complete authority to compete for IRA
- IRAs tend to be a life-long commitment and therefore a centerpiece for a
long-term credit union relationship;
- Credit unions have about twice the market share of IRAs in insured deposits
than they hold for all insured savings-that's because credit unions tend to
pay higher rates than banks; moreover, credit unions today have both on- and
off-balance sheet products to offer.
- No other depositories are interested in the IRA funds!
To help credit unions assess the awareness of their members of the new limits
and their interest in looking at credit union options, we have developed a short,
online survey that can provide you immediate information to plan your IRA campaign.