Americans are more likely to spend time selecting a restaurant for a special occasion, buying a flat screen television or tablet computer than on planning an IRA investment, according to a TIAA-CREF survey.
It found that only 17 percent of respondents are contributing to an IRA, a decline from 22 percent in 2012, potentially missing tax and savings benefits.
Only 47 percent of those not contributing to an IRA say they would consider it, down from 57 percent in 2013. Among those who already have an IRA, 55 percent said they spend an hour or less planning for the investment.
It is possible that a lack of understanding is responsible for low IRA contribution levels. More than one-third (35 percent) of respondents do not understand what an IRA is or the difference between an IRA and an employer-sponsored plan. This percentage is even higher among the Generation Y (age 18-34) population surveyed (45 percent).
“More and more people are unaware of the ultimate value an IRA can have in a building a stable and secure retirement,” said Doug Chittenden, executive vice president, Individual Business, at TIAA-CREF. “Americans today bear much more responsibility for their retirement savings than previous generations did. 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.”
Sixty percent of those who are contributing to an IRA also have an employer-sponsored plan such as a 401(k) or 403(b). Among those with both plans, 53 percent say they contribute to their IRA regardless of whether they have reached the contribution or matching limit of their employer-sponsored plan. This means they could be leaving money on the table if they are diverting money to their IRA before contributing enough to get their employer match.
It is not too late for individuals to contribute to an account and potentially reduce their 2013 taxes. Americans can contribute as much as $5,500 ($6,500 for those 50 and older) for the 2013 tax year until April 15, 2014. If an individual has not previously made his or her 2013 contribution, he or she may contribute for both 2013 and 2014 – a total of $11,000, or $13,000 for those age 50 or older – between January 1 through April 15, 2014.
TIAA-CREF is a national financial services organization with $564 billion in total assets under management as of Dec. 31, 2013, and is the leading provider of retirement services in the academic, research, medical and cultural fields.
The survey was conducted by independent research firm KRC Research and polled a random sample of 1,008 adults nationwide on their attitudes, preferences and behaviors regarding Individual Retirement Arrangements or IRAs.