Younger Americans are changing the dynamics of IRAs

Individual retirement accounts are growing in popularity with 44% of US households owning them by mid-2024, up from 34% ten years earlier.

But while Traditional IRAs are currently the most common with 33% owning them compared to 23% who own Roth IRAs, there is a generational divide according to the Investment Company Institute’s new study ‘The Role of IRAs in US Households’ Saving for Retirement, 2024.’

It found that while 46% of Boomers own Traditional IRAs compared to just 24% who own Roth IRAs, this changes through the generations. Gen Xers are split 31%/21% in favor of Traditional but the gap opens up among Millennials with 29% Roth vs. 20% Traditional, and still further among Gen Zs with 25% owning Roths vs. 12% Traditional.

Just 4% of all households own employer-sponsored IRAs but almost nine in ten IRA-owning households also had employer-sponsored retirement plan accumulations or defined benefit plan coverage.

ROLLOVERS

As of mid-2024, 59% of households with traditional IRAs reported that their accounts included rollovers from workplace retirement plans and 85% of these respondents emphasized the importance of safeguarding their retirement savings, having transferred their full account balance during their most recent rollover.

Additionally, 41% of traditional IRA owners with rollovers had further boosted their savings by making contributions to their IRAs at some point.

Among traditional IRA–owning households with rollovers, the top three reasons cited were: avoiding leaving assets behind at a former employer (23%), consolidation of assets (19%), and greater investment choices (14%).

“IRAs, often in tandem with retirement plans at work, are helping millions of people of all ages secure their financial future. The survey results show that a majority of Americans, nearly three-quarters of US households, have tax-advantaged retirement savings through work or IRAs,” said Sarah Holden, ICI Senior Director of Retirement and Investor Research.