The number of Americans contributing to an IRA is declining, according to a recent survey by TIAA-CREF.
Seventeen percent of the 1,008 adults surveyed are contributing to an IRA, a decrease of five percentage points from 2012, according to the TIAA-CREF IRA Survey. The survey reveals that the number of Americans who would consider an IRA as part of their retirement strategy also has fallen in the last year. Forty-seven percent of those not contributing say they would consider an IRA, down from 57 percent.
In fact, many people spent more time in the last year choosing a restaurant or picking out a flat screen television than they spent considering their IRA investments, according to the survey. Twenty-five percent of those surveyed spent two hours or more selecting a restaurant, 21 percent spent that amount of time picking a flat screen TV and 15 percent spent two hours or more on their IRA investments.
An IRA can be an incredibly powerful savings tool that can boost retirement security and offer immediate tax and savings benefits, according to TIAA-CREF, a financial services organization with $564 billion in total assets under management that provides retirement services to the academic, research, medical and cultural fields.
TIAA-CREF says a lack of understanding may be responsible for low IRA contribution levels. Thirty-five percent of the respondents do not understand what an IRA is or the difference between an IRA and an employer-sponsored plan. The percentage is even higher at 45 percent among Generation Y, ages 18 to 34.
“More and more people are unaware of the ultimate value an IRA can have in building a stable and secure retirement,” says Doug Chittenden, executive vice president of individual business at TIAA-CREF. “There is a pressing need to educate Americans from all age groups and income levels on the long-term retirement benefits that IRAs provide through compounded investment growth and tax savings.”
“We encourage people to meet with a financial advisor and take advantage of online tools to learn about their options and help guide their savings strategy. Employers who sponsor retirement plans also play a critical role in helping educate employees about their retirement options,” says Chittenden.