WINDSOR,Conn. March 19, 2014—A new LIMRA Secure Retirement Institute study finds that only 17 percent of American workers currently contribute to a traditiona lindividual retirement account (IRA) – and only 28 percent contribute to any kind of IRA (i.e., traditional, Roth, or SEP/SIMPLE).
Whilethe most cited reason that people give for not contributing to an IRA was thatthey felt they could not afford it (42 percent), nearly a quarter say thereason they are not contributing to an IRA is because they are saving inanother retirement savings vehicle, like a defined contribution (DC) plan. One in seven workers said they were uncertainhow to invest their assets or haven’t gotten around to it. Additionally, one third of workers believethey don’t understand enough about IRAs to contribute to one. (chart)
“Wewere surprised to find that 85 percent of workers had never been approached bya financial services company or advisor about setting up an IRA,” said CeciliaShiner, Assistant Research Director. “For workers who don’t have access to anemployer-sponsored DC plan, an IRA provides an excellent way for workers tosave for retirement. Our researchindicates that there is a significant market opportunity for financial advisorsand companies who help these consumers better understand and invest in an IRA.”
Thestudy revealed that more than a third of Generation X workers are contributingto an IRA (34 percent) while only one quarter of Millennials and Boomers currentlyare. According to the study, 40 percentof workers would be more likely to contribute to an IRA if a payroll deductionoption were available through their employer – and nearly half of Millennialssaid payroll deduction would spur them to contribute.
“Previousresearch has shown that employers are concerned about their employees’retirement prospects,” noted Shiner. “Offering an auto-IRA through the workplace could encourage workers tosystematically save and improve their financial security in retirement.”
LIMRASecure Retirement Institute found that workers who own an IRA are more likelyto feel confident that they will be able to live the retirement lifestyle they desire(55 percent) compared with just 24 percent of those who don’t own an IRA.
Atraditional IRA allows workers to direct pretax income, up to specific annuallimits, toward investments that can grow tax-deferred (i.e., no investment gainis taxed until the money is withdrawn).
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LIMRA Secure Retirement Institute provides comprehensive, unbiased research and education about all aspects within the retirement industry to improve retirement readiness and promote retirement security. For more information, please visit www.secureretirementinstitute.com.