2016 IRA Survey

Most Americans Don’t See a Difference Among IRAs

Few consider full range of benefits when choosing an IRA provider

NEW YORK (June 30, 2016) – The fifth annual TIAA IRA survey finds that many Americans do not consider the range of benefits an IRA provider can offer when selecting one.

Fifty-six percent say there is no difference or do not know if there is a difference among IRAs. Only 25 percent of respondents look for an IRA with an option to convert their savings into a stream of income in retirement. Thirty-six percent say that access to financial advice is an important factor when they evaluate possible IRAs.

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.

Leaving Money Behind

“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 Brian Bohaty, EVP of Individual Products and Services at TIAA. “An IRA that includes access to professional financial advice can help Americans think about the big picture when planning for a successful retirement.”

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
25 percent... have left behind at least one workplace retirement account with a former job

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 $5,000 to spend or invest. About one-fourth say they would pay down debt or create or add to an emergency savings fund instead. But 30 percent would spend the money on home renovations, a vacation, technology upgrades or a shopping spree.

For more information about the 2016 TIAA IRA survey, read the executive summary.