WASHINGTON – While they remain a small slice of credit unions' portfolios, individual retirement accounts may still represent a promising avenue for some in the industry, especially in the area of rollovers. That was one of the discoveries shared at a recent Callahan & Associates, Inc. Webinar on successfully positioning IRAs before tax day. There are now 4,152 credit unions or slightly half within the movement that are offering IRAs. At $48.9 billion, IRAs account for 8.6% of CU share composition, and last year they grew a "modest" 3.4%. Their relevance to CUs is nearly in sync with some of the ideals they promote, the consulting firm said. Besides supporting one of the industry's missions of member education and financial planning, IRAs have the ability to play to certain strengths such as competitive rates, one-on-service and reinforcing perceptions that members have built a sense of trust with their CUs. One notable area CUs may want to keep an eye on is the amount of IRA rollovers that will occur over the next few years. According to a Financial Research Corp. study, $409 billion in rollovers is estimated to take place by 2010 whereas contributions will account for $27 billion for the same time period. For $1.5 billion Eastman Credit Union, 80% of its total IRA deposits were gained through rollovers, said Debbie France, manager of member services. The CU has 4,687 IRAs totaling more than $100 million. The average IRA amount is $13,000. Eighty percent of members 50 and older have IRAs at Eastman. Approximately 15.41% of members ages 30-49 have IRAs and 4.57% in the 0-29 age category have them as well. France admits that Eastman is working on the CU's younger member base as it takes a proactive approach to IRAs lost through attrition from older members. Much of Eastman's IRA program success has come from extensive staff training, which has helped to communicate to members what is available. "We had struggled in the past but we have got it down to where the training has paid off," France said. "There is nothing more disturbing to me than to go in and see a person not understanding what a member needs." Its "aggressive" marketing approach includes visiting sponsor sites, offering penalty-free withdrawals for things like emergencies and for beneficiaries and acting "on every face-to-face opportunity." France said Eastman also offers competitive IRA rates. That has helped the Kingsport, Tenn.-based CU, which started out serving a single sponsor, went to a multiple sponsor charter in 2003 and then community charter last year. Eastman's average IRA growth has been 7% for the past four years, well above the industry average of 3.4%, France said. "My advice (for other credit unions) would be train, train, train," she suggested. "If you don't have a well-trained staff, it won't work." IRA share composition accounts for 14.6% of $997 million AEDC FCU in Tullahoma, Tenn. The average IRA balance was $18,161 as of Sept. 2005 with AEDC having a total of 6,681 accounts. AEDC targets all of its 121,000 members for IRAs but puts particular emphasis on members approaching retirement age because they tend to want direct rollovers, according to the CU. The $728 million NASA FCU follows up with members and targets those who are not making contributions. It has a 10% IRA share composition, according to Kim Williams, IRA manager. Part of its training includes ensuring staff have a solid understanding of how rollovers work. The CU is seeing more growth in Roth IRAs. Thirty percent of Minnesota's population are Baby Boomers and the first wave will turn 60 this year, stats that could translate into strong IRA prospects, according to Dennis Bauer, executive vice president, and Mike Rush, investment manager at $400 million Postman CU. The St. Paul, Minn.-based CU has 3,620 IRAs and saw 10% growth in this area in 2005. Investment services were directly responsible for more than $3 million in IRA rollovers into Postman's balance sheet. Referrals have helped the CU achieve this figure and growing IRAs will continue to be part of Postman's deposit growth strategy going forward, according to Bauer and Rush. -

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