Baby boomers account for 50 percent of all IRA ownership, including traditional, Roth and employer-sponsored IRAs.
New research from the Investment Company Institute also shows seven in 10 U.S. households have some type of tax-advantaged retirement savings through work or through IRAs; Forty-seven million, or 41 percent, of U.S. households reported owning IRAs in May 2008.
The fact that IRA ownership occurs mostly among older age groups "reflects the life-cycle approach to saving, which highlights that households tend to focus on retirement-related saving as they get older (and save for other goals such as education or buying a house when younger). Also, many traditional IRA owners became owners as a result of rollovers from employer-sponsored plans, which occur after at least some years in the workforce," according to ICI's study, "The Role of IRAs in U.S. Households' Saving for Retirement, 2008."
Rollovers from employer-sponsored retirement plans have fueled the growth in IRA, and more than half of households owning traditional IRAs have rollover assets in them.
"IRA assets now represent 10 percent of all household financial assets-up from 4 percent two decades ago," said Sarah Holden, ICI's senior director of retirement and investor research. "Americans are using IRAs as intended, both before and during retirement. They use IRAs to hold their 401(k) and other retirement balances when they change jobs, typically preserving the money until they retire."
Additional findings include:
- Twenty-two percent of households owning traditional IRAs took a withdrawal in tax-year 2007, in line with previous years' activities.
- Eighty-two percent of households that made withdrawals were retired.
- Six out of 10 traditional IRA-owning households that did not make withdrawals indicated that they do not plan to tap their IRAs until they are required to take minimum distributions at age 70 1/2 .
- The most commonly cited planned future use of traditional IRA withdrawals was to pay for living expenses. In addition, of the traditional IRA-owning households without withdrawals, 53 percent indicated a future use of the monies would be to cover an emergency, such as healthcare expenses.
- Although most U.S. households were eligible to contribute to IRAs, few did so: only 14 percent of U.S. households contributed to any type of IRA in tax-year 2007, and very few eligible households made "catch-up" contributions to traditional or Roth IRAs.
- In 2008, traditional IRAs were the most common type of IRA owned, followed by Roth IRAs and employer-sponsored IRAs.