The primary purpose of ERISA was make certain that the retirement promises made by private companies to their employees would be kept, and that tax-preferred retirement savings programs would be made available in a nondiscriminatory fashion. But what about those who did not participate in an employer plan? For them, the Individual Retirement Account was created. At that time, up to $1,500 could be contributed by eligible taxpayers to an IRA, and a corresponding deduction taken. The eligibility rules were later loosened in 1981, but the tax deduction was later scaled back for higher-income taxpayers. In 1998, the Roth IRA was introduced, providing for an after-tax savings option with potentially tax-free distributions.

According to the Investment Company Institute’s 2024 Fact Book:

• 56 million U.S. households owned an IRA at year-end 2023.
• Total IRA assets have reached $13.6 trillion, which is about 35% of all U.S. retirement assets.
• The next largest category, at $7.4 trillion, are 401(k) plans, followed by private-sector pension plans with $3.2 trillion.
• Mutual funds comprise 43% of IRA assets.
• The spectacular growth of IRAs has been fueled in part by rollovers from company retirement plans.
• Roth IRAs have $1.4 trillion in assets, while traditional IRAs have $11.4 trillion.
• New traditional IRAs mostly come from rollovers (74%), and new Roth IRAs mostly come from annual contributions (77%).
• IRAs are being used for their intended purpose, making retirement more financially secure. 60% of those making traditional IRA withdrawals are 70 years old or older, while just 6% are under age 59.
• Roth IRA owners generally avoid withdrawals, as only 6% of owners take them.
• Median ages are 51 for Roth IRA owners, 62 for Traditional IRAs. That may reflect the importance of IRA rollovers at retirement to preserve tax benefits.

Do you have a question concerning IRAs? Call us at 920-563-6616 ext. 3070, or email wealth@bankwithpremier.com.