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Retirement Planning > Saving for Retirement > IRAs

How Americans Use IRAs

By Marlene Satter

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The majority of U.S. households that have traditional IRAs say that those accounts contain rollovers from employer retirement plans.

According to the study “The Role of IRAs in US Households’ Saving for Retirement, 2018,” from the Investment Company Institute, 58% of traditional IRA-owning households (19 million U.S. households) said their traditional IRAs contained rollovers from employer-sponsored retirement plans in 2018.

Respondents cited several reasons for rolling over those accounts: They didn’t want to leave assets with a former employer (64%); they wanted to preserve the tax treatment of those savings (60%); they were consolidating assets (54%); and rolling the funds over gave them more investment options (54%).

In addition, more than four in 10 traditional IRA-owning households with rollovers said they also made contributions.

The study also found that households with traditional IRAs rarely withdrew from their accounts, with most withdrawals retirement related. Just 26% of households owning traditional IRAs in 2018 took withdrawals in tax year 2017, which is consistent with previous years.

In addition, 85% of households making withdrawals were retired, and only 5% of traditional IRA-owning households headed by workers below the age of 59 took withdrawals in tax year 2017.

The study also found that a third of U.S. households had IRAs in 2018, and more than 80% of them also had funds in employer-sponsored retirement plans. More than a quarter of U.S. households had traditional IRAs — the most common type; that was followed by Roth IRAs (about 18%) and employer-sponsored IRAs (6%).

Households with IRAs spanned a wide range of incomes, with the majority earning less than $100,000; 12% had household incomes less than $35,000 and 40% had household incomes between $35,000 and $99,999.

Also, most traditional IRA-owning households have a retirement strategy, typically with a number of moving parts such as reviewing asset allocations, determining retirement expenses, developing a retirement income plan, setting aside emergency funds and figuring out when to take Social Security benefits.

— Check out 401(k)s Are Failing; Here’s What We Need Instead, Professor Says on ThinkAdvisor.

Marlene Satter

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