Friday, March 27, 2015
A recent LIMRA study found that just 17 percent of American workers contribute to a traditional individual retirement account (IRA) – and only 28 percent contribute to any kind of IRA, including traditional, Roth or SEP/SIMPLE accounts. When asked to provide a reason for that decision, the majority of respondents felt they could not afford to contribute to an IRA. Nearly a quarter of respondents said they are saving in another retirement savings vehicle, such as a defined contribution (DC) plan, and one in seven workers said they were unsure how to invest their assets or haven’t gotten around to it. A third of workers believe they don’t understand enough about IRAs to contribute to one.“For workers who don’t have access to an employer-sponsored DC plan, an IRA provides an excellent way for workers to save for retirement,” says Cecilia Shiner, assistant research director for LIMRA.
The study also found that more than a third of Generation X workers are contributing to an IRA (34 percent), compared to only a quarter of Millennials and Boomers. Forty percent of workers would be more likely to contribute to an IRA if a payroll deduction option were available through their employer; nearly half of Millennials said payroll deduction would spur them to contribute. Workers who own an IRA are more likely to feel confident that they will be able to live the retirement lifestyle they desire (55 percent), compared to just 24 percent of those who don’t own an IRA.
A traditional IRA allows workers to direct pretax income, up to specific annual limits, toward investments that can grow tax-deferred (i.e., no investment gain is taxed until the money is withdrawn).
Source: LIMRA
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