IRA's are Important

posted 1/12/2013 in Trust

A new study by the Investment Company Institute (ICI)reveals that IRAs play a crucial role in retirement financial security for more and more Americans. Among the findings: 

• IRAs are now owned by 40% of U.S. households. The majority of these IRAs are traditional, tax-deferred ones.
• IRAs now hold $5.1 trillion in assets. That figure represents more than 25% of all retirement assets (including money set aside in employer retirement plans), and it is more than 10% of all household financial assets.
• The growth in IRA assets has been fueled by IRA rollovers, which account for more than half of
all IRAs.
• IRAs are being used for retirement, as Congress intended. Only 7% of IRA withdrawals in 2012 were made by IRA owners who were younger than 59½.
• Age and income are correlated with IRA ownership. Only 28% of those under age 35 have an IRA, while 47% of those age 55 to 64 have one. Among those with income from $35,000 to $50,000, 36% have an IRA. Not surprisingly, 82% of those with income over $200,000 have one.
What do retirees plan to do with their IRA money? Pay regular living expenses and keep it as an emergency fund, and not blow it on big-ticket items. The table below adds up to more than 100%, because multiple responses were allowed.

What do you plan to do with your IRA withdrawals?

Pay for living expenses  63%
Use for an emergency  62%
Reinvest or save in another account  41%
Pay healthcare expenses  31%
Home purchase, repair or remodeling  27%
Pay for education  14%
Buy a car or boat  9%
Other  18%

Source: ICI Research Perspective, The Role of IRAs in U.S. Households’ Saving for Retirement, 2012 (December 2012)

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