Personal savings has become an increasingly important part of preparing for financial security in retirement. The Investment Company Institute found that, despite recent economic challenges, individual retirement account (IRA) ownership has remained steady, suggesting many Americans are resisting the temptation to tap retirement savings for short-term needs.
According to the ICI report, The Role of IRAs in U.S. Households’ Saving for Retirement, 2009, about 39% of households own IRAs: roughly 31% report owning traditional IRAs, 15% own Roth IRAs, and 8% own employer-sponsored IRAs (SIMPLE, SEP and SAR-SEP IRAs). IRA holdings now represent about one-quarter of U.S. total retirement assets and a notable share of household financial assets. These tax-advantaged accounts help supplement employer plans and provide a cushion for unexpected retirement expenses.
The report notes that IRA growth has been fueled largely by rollovers from employer-sponsored plans. More than half of traditional IRA-owning households held rollover assets, and most reported rolling their most recent retirement-plan distribution entirely into an IRA. Rolling over distributions preserves tax-deferred savings and helps avoid early-withdrawal penalties for people changing jobs or moving into self-employment.
By contrast, relatively few eligible individuals make new contributions. In the survey year, only about 15% of households contributed to a traditional or Roth IRA, highlighting how rollovers — rather than annual contributions — have driven IRA growth. Contribution limits, deduction rules, and income-related restrictions can affect the ability to add new funds.
Withdrawals from IRAs were generally infrequent and largely retirement-related. Only a minority of traditional IRA holders took withdrawals in the survey year, and most of those withdrawals occurred in retirement. Early withdrawals (before age 59½) were uncommon, and many households indicated it was unlikely they would withdraw before the required-distribution age.
When withdrawals did occur, they were typically modest — a median of about 8% of the account balance — and many were used for living expenses in retirement. Other common uses included health care costs, home repairs or remodeling, and emergencies. A portion of withdrawals was reinvested or deposited in other accounts.
For individuals nearing retirement, IRAs are often paired with other products to diversify income sources. For example, Income Annuities can provide steady payments to help cover basic living costs regardless of market fluctuations, and understanding options for IRAs and Retirement Savings is important, especially for those without employer pensions.
Efforts to increase regular contributions would strengthen long-term retirement security for many households. Whether you are seasonal, self-employed, or between jobs, reviewing contribution rules, rollover options, and distribution rules can help you make informed choices. If you want personalized help reviewing your options, talk to an agent.
The ICI findings reaffirm that IRAs play a vital role in household retirement wealth and income, but boosting new contributions remains a key challenge for improving overall retirement preparedness.