Study: Most Americans not in IRA

February 1, 2006 ( - Even though most US families do not now own an Individual Retirement Account (IRA), the accounts can potentially be a vital part of Americans' retirement savings efforts, a new study found.

A news release from the Investment Company Institute (ICI) said its study found that households that take advantage of IRAs typically have accumulated more financial assets than those who have not. In 2005, for example, median financial assets of households owning IRAs were six times greater than the financial assets of households that do not own IRAs, ICI said.

The study also highlighted that the rollover feature of traditional IRAs has helped many Americans preserve their retirement savings. In 2005, more than 16 million US households, or 43% of all US households owning traditional IRAs, had traditional IRAs that included rollover assets.

Households investing in IRAs can accumulate sizable balances over time. “Opening an IRA and making regular contributions throughout the years can add a significant boost to retirement savings,” said Sandy West, Director of Market Policy Research at ICI, in the news release. “Households owning IRAs for 20 years or more had median IRA holdings of $35,300 in 2005, while those households owning IRAs for less than five years had median IRA holdings of $7,000.”

IRAs and employer-sponsored retirement plans are the two main types of tax-advantaged savings vehicles available to Americans. The IRA has grown to represent the largest segment of the $12.9 trillion retirement market, and currently 41% – or 46.8 million US households – own IRAs, even though most households are eligible to make contributions to them, ICI said.

The study is  here .