Majority of IRA-Owning Households Are Older Groups of Workers

Ownership of individual retirement accounts (IRAs) is greatest among older groups of working-age individuals, according to a survey by the Investment Company Institute (ICI). The results reveal households tend to focus on saving for such goals as education or buying a house when younger, and then focus their attention to retirement-related savings as they age.

The survey shows 65% of households that own an IRA are headed by individuals aged 45 or older. Of those households, 36% are headed by an individual age 45 to 54, and 37% are headed by an individual age 55 to 64.

“With $7.3 trillion in assets, IRAs represent 30% of U.S. total retirement assets, and are a critically important vehicle used by Americans to save for retirement,” says Sarah Holden, senior director of retirement and investor research at ICI. “This study highlights that individuals increasingly take advantage of IRAs as they reach their peak earning years and approach retirement, often relying on IRAs as a rollover vehicle for accumulations from work-sponsored plans as they leave jobs.”

The study finds a positive correlation between an increase in household income and IRA ownership, a pattern consistent with the fact that lower-income households generally have a lower propensity to do additional saving for retirement. Further, lower-income households tend to be focused on near-term spending needs and get a higher replacement benefit through Social Security. The findings reveal a majority of IRA-owning households have moderate incomes. Half of households with annual incomes of $50,000 or more owned IRAs, compared with 16% of households with less than $50,000 in income. Additionally, nearly three in five households with incomes of $100,000 or more owned IRAs.

Other findings in the report are:

• About one-third of U.S. households owned IRAs in 2014, with 63% of all U.S. households having retirement plans through work or IRAs, or both;
• The growth of IRAs has been fueled by rollovers, as about 50% of traditional IRA-owning households in 2014 indicate their IRAs contained rollovers from employer-sponsored retirement plans;
• Only 12% of U.S. households contributed to an IRA in tax year 2013; and
• Most traditional IRA withdrawals were made by retirees. One in five traditional IRA-owning households took withdrawals in tax year 2013, with three-quarters of households with traditional IRA withdrawals categorized as being retired.

The IRA Owners Survey was conducted from May to July 2014 and was based on a telephone sample of 3,200 randomly selected, representative U.S. households owning traditional IRAs. The report is available here.