Where IRAs Stand in Retirement Saving

More than one-third of U.S. households had an IRA in mid-2019, says a recent report that looks at the prevalence and nature of IRA ownership in the United States. 

By the middle of 2019, write Sarah Holden and Daniel Schrass in the recently issued Investment Company Institute (ICI) report, “The Role of IRAs in U.S. Households’ Saving for Retirement, 2019,” 36% of U.S. households had an IRA. Holden is a Senior Economist at the ICI, and Schrass is an Associate Economist there. 

But that’s only part of the story. By that time, say Holden and Schrass, 28% of U.S. households had traditional IRAs, the most common IRA; Roth IRAs and employer-sponsored IRAs followed in prominence. 

Employer Role Key

As with other retirement plans and accounts, employer sponsorship is central to IRA ownership, Holden and Schrass report. Approximately 60% of households with traditional IRAs said their accounts contained rollovers from employer-sponsored retirement plans. Of them: 

• 86% said they rolled over the entire retirement account balance into an IRA in their most recent rollover; and 
• 43% also had made contributions to their traditional IRAs at some point. 

The report indicates that IRAs generally do not stand alone as a source of retirement funding. More than 80% of the households that have an IRA also have either a pension or retirement savings through some other employer-sponsored retirement plan, it says, and 75% of households that had an IRA also participated in a defined contribution plan.

And just 12% of all households contributed to either a traditional IRA or a Roth in tax year 2018. However, almost three times as many households with traditional or Roth IRAs contributed to their IRAs in tax year 2018. And the even better news is that a majority of those who made no contribution were not bereft of funds: 62% had fueled their IRAs with a funds from a rollover and 69% participated in a DC plan. 

The Big Picture

IRAs may not be part of the equation for a majority of U.S. households, but they nonetheless are making an important contribution to retirement savings and preparation. By the second quarter of 2019, write Holden and Schrass, IRAs held one-third of all U.S. retirement assets, amounting to almost $10 trillion in assets. And IRAs account for 11% of all household financial assets, they add. 

These figures represent growth over the last 20 years, Holden and Schrass report:

Further, write Holden and Schrass, a majority of IRA holders are preparing for retirement: more than two-thirds of them indicated they have a strategy for managing income and assets in retirement. And IRA holders mean business about saving, the report indicates: 88% of households that made traditional IRA withdrawals were retired, and a mere 5% of traditional IRA–owning households in mid-2019 headed by individuals younger than age 59 took withdrawals.