Individual retirement accounts (IRAs) are playing an increasingly important role in Americans’ saving for retirement. New research released today by the Investment Company Institute (ICI) shows that 44% of U.S. households reported that they owned IRAs as of mid-2024, up from 34% a decade ago.
“Both traditional and Roth IRAs have become increasingly popular over time, with younger households focusing on Roth IRAs and older households more likely to own traditional IRAs.”
ICI’s Sarah Holden
The study, The Role of IRAs in US Households’ Saving for Retirement, 2024, gathers information on the characteristics and activities of IRA-owning households. It found that Traditional IRAs were the most common type of IRA, owned by 33% of U.S. households in mid-2024, followed by Roth IRAs (owned by 26%) and employer-sponsored IRAs (4%). Nearly 9 in 10 IRA-owning households also had employer-sponsored retirement plan accumulations or defined benefit plan coverage, showing that they are being used in concert with 401(k)s or pension plans.
“IRAs, often in tandem with retirement plans at work, are helping millions of people of all ages secure their financial future. The survey results show that a majority of Americans, nearly three-quarters of U.S. households, have tax-advantaged retirement savings through work or IRAs,” said Sarah Holden, ICI Senior Director of Retirement and Investor Research. “Both traditional and Roth IRAs have become increasingly popular over time, with younger households focusing on Roth IRAs and older households more likely to own traditional IRAs.”
Not surprisingly, the study found rollovers from employer-sponsored retirement plans have fueled growth in IRAs. In mid-2024, 59% of traditional IRA-owning households indicated that their traditional IRAs contained rollovers from employer-sponsored retirement plans. Among households with rollovers in their traditional IRAs, 85% recognized the importance of preserving their work nest egg, indicating that they had rolled over the entire retirement account balance in their most recent rollover.
Further building their savings, 41% percent of traditional IRA-owning households with rollovers had also made contributions to their traditional IRAs at some point.
Recent years show a slight upward trend in contribution activity, although fewer than one in five U.S. households make contributions to IRAs. Across all U.S. households, 16% contributed to traditional or Roth IRAs in tax year 2023. Looking at households owning traditional or Roth IRAs in mid-2024, 37% made contributions in tax year 2023. Thirty-one percent of traditional IRA-owning households in mid-2024 took withdrawals in tax year 2023, in line with recent prior years.
Other highlights from the study include:
- Most IRA-owning households have a planned retirement strategy. In mid-2024, 69% percent of traditional IRA-owning households and 65% of Roth IRA-owning households indicated that they have a strategy for managing income and assets in retirement. Typically, these strategies have many components, including: reviewing asset allocations, determining their retirement expenses, developing a retirement income plan, setting aside emergency funds, and determining when to take Social Security benefits.
- Traditional IRA-owning households with rollovers cite multiple reasons for rolling over their retirement plan assets into traditional IRAs. The three most common primary reasons for rolling over were not wanting to leave assets behind at the former employer, wanting to consolidate assets, and wanting more investment options (23%, 19%, and 14% of traditional IRA-owning households with rollovers, respectively).
- Majority of traditional IRA withdrawals were made by retirees. Ninety percent of households that made traditional IRA withdrawals were retired. Only 5% of traditional IRA-owning households in mid-2024 headed by individuals younger than 59 took withdrawals.
Read the complete study here.
SEE ALSO:
• 7 in 10 Retirees Over 70 Receive Income from 401(k)s or IRAs
• TIAA Lifetime Income Annuities Now Available in IRAs
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
