Many Americans do not consider the range of benefits an IRA provider can offer when selecting one. And 56 percent say there is no difference or do not know if there is a difference among IRAs, according to the 2016 TIAA IRA survey.
The research shows that only 25 percent of respondents look for an IRA with an option to convert their savings into a stream of income in retirement. Thirty-six percent say that access to financial advice is an important factor when they evaluate possible IRAs.
TIAA finds that many Americans use both savings and investment accounts to fund their retirement: 73 percent of those with an IRA say they plan to use it together with other accounts, such as a workplace retirement plan, to cover their retirement expenses.
“People often have multiple accounts with retirement savings,” says Brian Bohaty, executive vice president of individual products and services at TIAA. “In fact, 25 percent have left behind at least one workplace retirement account with a former job.”
The survey finds that 33 percent of American adults have an IRA. However, only 41 percent of Americans who are not currently contributing to an IRA would consider one as part of their retirement strategy – a decline from 56 percent in 2015. Their reasons include:
51 percent say they are content with their current retirement savings plan.
46 percent say they don’t have enough money to save more than they already do.
25 percent say they don’t know enough about IRAs.
23 percent say they already have a workplace retirement plan and don’t need an IRA.
The percentage of people who say they don’t know enough about IRAs has dropped from 39 percent in 2015, while the number of people who have IRAs has held steady, the report adds.
“More people are learning about IRAs, but we aren’t seeing more individuals translate that knowledge into action,” says Bohaty.
The survey highlights an opportunity for more IRA education with one segment of the population: Gen Y. Thirty-five percent of Gen Y respondents who are not contributing to an IRA say they do not know enough about IRAs to consider using one.
But Gen X respondents are more likely to say they don’t have enough money to save more than they already do. A majority (55 percent) of those ages 36 to 51 who are not contributing to an IRA say they are unable to save more.
The survey reveals that 6 percent of respondents would contribute to an IRA if they had an extra $5,000 to spend or invest. About one-fourth say they would pay down debt or create or add to an emergency savings fund instead.
But 30 percent would spend the money on home renovations, a vacation, technology upgrades or a shopping spree.