Most Americans Don’t See a Difference Among IRAs
Few consider full range of benefits when choosing an IRA provider
Financial advice may be extremely useful, though, as individuals think about how to save for retirement – and how to use their savings wisely during retirement. Many Americans use a combination of savings and investment accounts to fund their retirement: 73 percent of those with an IRA say they plan to use it together with other accounts, such as a workplace retirement plan, to cover their retirement expenses. Professional advice can help people make sense of a complex topic and develop a solid plan for their finances.
“Financial planning can be complicated, and people often have multiple accounts with retirement savings. In fact, 25 percent have left behind at least one workplace retirement account with a former job,” said
Furthermore, with many individuals living 20 or more years in retirement, it’s critical they have a plan to generate adequate income to cover their expenses.
“Many people focus on a lump sum of money they want to have saved before they retire, but a wiser approach is to think about how your savings will provide a steady source of income during retirement,” said Bohaty. “The right IRA can help ensure you have the necessary funds to pay for the essentials, such as housing and medical care, and decrease the risk of outliving your retirement savings.”
Adding IRAs to Your Retirement Tool Box
The survey finds that 33 percent of American adults have an IRA. However, only 41 percent of Americans who are not currently contributing to an IRA would consider one as part of their retirement strategy – a decline from 56 percent in 2015. Their reasons include:
- 51 percent say they are content with their current retirement savings plan.
- 46 percent say they don’t have enough money to save more than they already do.
- 25 percent say they don’t know enough about IRAs.
- 23 percent say they already have a workplace retirement plan and don’t need an IRA.
Interestingly, the number of people who say they don’t know enough about IRAs has dropped from 39 percent in 2015, while the number of people who have IRAs has held steady.
“More people are learning about IRAs, but we aren’t seeing more individuals translate that knowledge into action,” said Bohaty. “For some, this may be a missed opportunity to build financial well-being, as IRAs can be a versatile part of the retirement planning tool box. They can create flexible income options in retirement, and also offer tax savings and allow investments to compound over time.”
The survey highlights an opportunity for more IRA education with one segment of the population: Gen Y. Thirty-five percent of Gen Y respondents who are not contributing to an IRA say they do not know enough about IRAs to consider using one.
Gen X respondents, on the other hand, are more likely to say they don’t have enough money to save any more than they already do. With multiple financial needs vying for priority at this life stage, it is not surprising that 55 percent of those ages 36 to 51 who are not contributing to an IRA feel they are unable to save more.
“Balancing the many demands on your money and time can be overwhelming. It’s important to understand there are different types of IRAs, including some that can support your short-term priorities as well as your long-term goals – especially for younger savers. Regardless of your overall goals, look for an IRA provider that can be a true ally, with services that help you get the most out of your investments,” said Bohaty.
An IRA provider that offers access to financial advice also can help individuals handle any extra income wisely. The survey reveals that 6 percent of respondents would contribute to an IRA if they had an extra
For more information about the 2016 TIAA IRA survey, read the executive summary.
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