One in seven workers said they were uncertain how to invest their retirement assets or haven’t gotten around to it.

A new LIMRA Secure Retirement Institute study finds that only 17 percent of American workers currently contribute to a traditional individual retirement account (IRA). And only 28 percent contribute to any kind of IRA (i.e., traditional, Roth, or SEP/SIMPLE).

While the most cited reason that people give for not contributing to an IRA was that they felt they could not afford it (42 percent), nearly a quarter say they are not contributing to an IRA because they are saving in another retirement savings vehicle, like a defined contribution (DC) plan.  One in seven workers said they were uncertain how to invest their assets or haven’t gotten around to it.  Additionally, one third of workers believe they don’t understand enough about IRAs to contribute to one. (See chart on next page.)

“We were surprised to find that 85 percent of workers had never been approached by a financial services company or advisor about setting up an IRA,” said Cecilia Shiner, Assistant Research Director. “For workers who don’t have access to an employer-sponsored DC plan, an IRA provides an excellent way for workers to save for retirement.  Our research indicates that there is a significant market opportunity for financial advisors and companies who help these consumers better understand and invest in an IRA.”

The study revealed that more than a third of Generation X workers are contributing to an IRA (34 percent) while only one quarter of millennials and boomers currently are.   According to the study, 40 percent of workers would be more likely to contribute to an IRA if a payroll deduction option were available through their employer. And nearly half of Millennials said payroll deduction would spur them to contribute. 

“Previous research has shown that employers are concerned about their employees’ retirement prospects,” noted Shiner.  “Offering an auto-IRA through the workplace could encourage workers to systematically save and improve their financial security in retirement.”

LIMRA Secure Retirement Institute found that workers who own an IRA are more likely to feel confident that they will be able to live the retirement lifestyle they desire (55 percent) compared with just 24 percent of those who don’t own an IRA. 

A traditional IRA allows workers to direct pretax income, up to specific annual limits, toward investments that can grow tax-deferred (i.e., no investment gain is taxed until the money is withdrawn).