Americans just aren’t into IRAs. Less than a fifth use the traditional variety, and less than a third use one of any kind.
So says a new LIMRA Secure Retirement Institute study, which comes on the heels of a TIAA-CREF study that found that just 8 percent of Americans put savings in an IRA at the top of their priority list.
According to the LIMRA study, Americans appear to be really clueless on the potential benefits of IRAs, with almost a quarter saying that they don’t have one because they save in a different retirement savings vehicle, as if the two types of accounts were mutually exclusive, and a third saying that they don’t understand enough about IRAs to contribute to one.
Of course, IRAs are popular with some people, typically high-net worth individuals who have contributed as much as they’re allowed each year into their 401(k)s. IRAs held $7.7 trillion at the end of 2014, up from $4.5 trillion in 2009, according to Spectrem Group.
In any case, the most common reason people give for not using some form of IRA, whether traditional, Roth or SEP/SIMPLE, is that they can’t afford to — with 42 percent citing that as the reason. And one out of seven said they weren’t sure how to go about investing their assets or just haven’t gotten around to it.
GenXers, interestingly enough, contribute to IRAs at a higher rate than either millennials or boomers — with 34 percent of GenXers putting money into IRAs compared with just a quarter of boomers and a quarter of millennials. However, study results indicated that if payroll deductions at work were available for such accounts, that number could rise to 40 percent — with almost half of millennials saying that would be enough to get them to kick in.
Having an IRA gave workers confidence, however, with the study showing that 55 percent of those who have one feeling confident that they will be able to have the retirement lifestyle they want, compared with just 24 percent of those who don’t have IRAs.
The financial industry apparently is not very aggressive about pushing IRAs. Eighty-five percent of those surveyed said they had never been approached by either a financial services company or an advisor about setting up an IRA.