Fewer than one in five American workers are contributing to traditional individual retirement accounts, with many pointing to a lack in financial confidence to afford such contributions as one of the biggest reasons for not investing.
While low financial confidence was the most cited reason (42%), nearly a quarter say the reason they are not contributing to an IRA is because they are saving in another retirement savings vehicle, like a defined contribution plan, according to a recent study from LIMRA. Further, one in seven workers said they were uncertain how to invest their assets or simply havent gotten around to it.
Also see: Outside-the-box retirement planning
During the past few years, [the Bureau of Labor Statistics] and our own research has seen an increase in the percentage of workers with access to, and who are participating in, workplace retirement plans, said Danielle Holland, senior vice president of research and marketing for the Insured Retirement Institute. Though these are modest gains, given the ease of contributing to a plan directly via payroll deductions, to some extent this may account for some of the drop.
LIMRA also adds that generational preferences may also be contributing to the decline of traditional IRAs.
The study reveals that more than a third of Generation X workers are contributing to an IRA (34%) while only one quarter of both millennials and baby boomers are.
According to the data, 40% of workers would be more likely to contribute to an IRA if a payroll deduction option were available through their employer and close to 50% of millennials agreed, saying payrolls deductions would help sway them to contribute.
Previous research has shown that employers are concerned about their employees retirement prospects, said Cecilia Shiner, assistant research director at LIMRA. Offering an auto-IRA through the workplace could encourage workers to systematically save and improve their financial security in retirement.
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