The Role of IRAs in US Households’ Saving for Retirement, 2020

Abstract

This paper presents survey results on the incidence of IRA ownership in the United States and the activity of IRA-owning households. In mid-2020, 37 percent of US households owned individual retirement accounts (IRAs), most commonly traditional IRAs. More than eight in 10 IRA-owning households also had employer-sponsored retirement plan accumulations or had defined benefit plan coverage. All told, more than six in 10 US households had retirement plans through work or IRAs; more than three-quarters of near-retiree households did. Rollovers from employer-sponsored retirement plans have fueled the growth in IRAs. In mid-2020, about six in 10 traditional IRA–owning households indicated that their IRAs contained rollovers from employer-sponsored retirement plans. Among households with rollovers in their traditional IRAs, 81 percent indicated that they had rolled over the entire retirement account balance in their most recent rollover; 43 percent had also made contributions to their traditional IRAs at some point. Traditional IRA–owning households with rollovers cite multiple reasons for rolling over their retirement plan assets into traditional IRAs. The three most common primary reasons for rolling over were not wanting to leave assets behind at the former employer, wanting to preserve the tax treatment of the savings, and wanting to consolidate assets (23 percent, 17 percent, and 16 percent of traditional IRA–owning households with rollovers, respectively). Another 11 percent of traditional IRA–owning households with rollovers reported that their primary reason for rolling over was to access more investment options. The paper also provides insight into contribution and withdrawal activity, as well as IRA-owning households’ multi-pronged plans to manage assets and income in retirement.

Keywords: Retirement, IRAs, Asset Allocation, Investor Behavior

JEL Classification: D14, D31, G11, J26