More Than One-Third of U.S. Households Own IRAs

Over three-quarters purchased their IRA through an investment professional.

More than one-third of U.S. households owned an individual retirement account (IRA) in mid-2017, according to research by the Investment Company Institute (ICI).

Traditional IRAs remain the most popular type of IRA, owned by 28% of U.S. households. The next most common is Roth IRAs, held by 10% of U.S. households. The third most common is employer-sponsored IRAs, owned by 6% of U.S. households.

Among traditional IRA-owning households, 77% purchased them through an investment professional, be that a full-service brokerage, financial planning firm, bank, savings institution, or insurance company. Thirty percent made these purchases through direct marketing sources, including mutual fund companies and discount brokerages.

“U.S. households have access to a full range of investment options for opening their IRAs,” says Sarah Holden, senior director of retirement and investment research at ICI. “This level of accessibility is one of the most popular features of IRAs as a vehicle for retirement savings.”

Rollovers are the most common creation method for people opening an IRA, with 57% of traditional IRA-owning households having opened their IRA through this method. The majority transferred their entire retirement plan balance into the IRA.

Asked why they rolled their assets over from a 401(k) or other type of employer-sponsored retirement plan, 63% said it was because they did not want to leave their assets with a former employer, 59% said it was to preserve the tax treatment of their savings, 58% wanted to consolidate assets, and 49% wanted access to more investment options.

The required minimum distribution (RMD) requirement is typically the impetus for taking money out of an IRA; among the 9.1 million traditional IRA-owning households that took a withdrawal in 2017, 71% said it was because of the RMD. Sixty-four percent consulted with a financial adviser to determine how much they should withdraw.

Asked what they used the money for, investors said it was for living expenses, to reinvest or move to another account, pay for a home purchase or repair or to cover health care costs.

ICI’s full report, “The Role of IRAs in U.S. Households’ Saving for Retirement, 2017,” can be downloaded here.