How Much the Average American Has in their IRA

THIS POST MAY CONTAIN AFFILIATE LINKS. PLEASE READ MY DISCLOSURE FOR MORE INFO.

 

Recently, I shared how much the average American had saved in their 401(k)s.  The numbers were not good.  I had hypothesized that the numbers may not be as bad as they appear since the average American today stays in the same job for 3-4 years before moving on.  

 

If the average American switches jobs that often, there is a good chance that his or her 401(k) balance is low because they may roll over their 401(k) into an IRA.  

 

If that is indeed the case, I wondered what the average American has in their IRA account today.

 

Traditional vs Roth IRAs

Just to be clear, most people are familiar with the two main types of IRAs available today: a traditional IRA and a Roth IRA.  A traditional IRA allows pre-tax contributions, and a Roth IRA allows post-tax contributions.  Both of these allow maximum contributions of up to $5,500 if you’re under 50 years of age.  If you’re older than 50 years of age, you’re allowed to contribute an additional $1,000.  If you need a refresher on these two types of IRAs, click here

 

Average IRA Balances

According to the latest data analyzed by the EBRI at the end of 2015, there were more than 27.9 million IRA accounts owned by 22.1 million individuals.  These IRA accounts contained assets worth $2.76 trillion.

 

This breaks down to an average IRA account balance of $99,017 for year-end 2015.  When you combine the owner’s other IRA accounts, that average figure rises to $125,045.

 

average american IRA amount

 

Following the graph above, clearly, IRA accounts steadily grow with age based on compound interest.  Albert Einstein once said, “Compound interest is the eighth wonder of the world.  He who understands it, earns it … he who doesn’t … pays it.”

 

Those that have reached the retirement age of 65 on average have accounts that exceed $200,000.  That is a healthy balance to carry as one enters retirement.  In addition to the graph above, adults under 25, have slightly larger balances than those within the 25-29 range.  Digging deeper into the numbers, it appears that more people open accounts in the 25-29 age group than those under 25.  Therefore, those under 25 years old who open up accounts probably have more motivation to contribute more.

 

Median IRA Balances

I was talking to a woman at work that said she opened her first Roth IRA when she was 16 years old.  She told me that she currently has a “very healthy balance” now that she is in her early 30s.  

 

But as Mark Twain famously said, “There are three kinds of lies: lies, damned lies and statistics.”  

 

The average IRA balances can be deceiving since investors that save more can skew the numbers to look better than they really are.  

 

Looking at the median (midpoint) IRA balance, we see a different number.

 

average american IRA amount

 

By analyzing the median IRA balances, they are almost a third lower than the average balances shared above.  On face value, that is scary.  Clearly, those in the top end of the range are doing much better than those towards the bottom since there is such a substantial difference between the average and median.  

 

Rollover vs Regular Accounts

What does the breakdown of these accounts look like between rollover accounts and regular accounts?

 

average american IRA amount

 

Traditional IRAs originating from assets rolled over from other tax-qualified plans (TOFR) had the highest average individual balance at $153,865, while regular Roth IRAs had the lowest average individual balance at $38,834.12.

 

This means that when people leave their companies, they tend to roll their balances over into a traditional IRA, instead of leaving it with their old companies.  This is a wise move, as they will maintain control over the money.  Additionally, they would avoid a sticky situation if their old company switches 401(k) providers and changes the positions of their funds.

 

Bleak Balances

Interestingly enough, Traditional IRAs outnumbered Roth IRAs by nearly a 3 to 1 margin.  As someone that utilizes a Roth IRA, I thought more people would use the Roth IRA to diversify their tax situation for the future, but clearly, that’s not the case.

 

People who contribute to IRAs lag when it comes to contributing for the future.  I was hopeful that more people who rolled over their 401(k) accounts would have bigger balances.  

 

I implore you all to start saving today.  In the future, Social Security benefits may not afford you the lifestyle that you desire.  Don’t wait to make the change.  

 

So readers, are you surprised by the IRA balances?  How do you stack up compared to your age group?  Share your thoughts below.

Mustard Seed Money

Welcome to the website. A mustard seed is a very small seed but astonishingly grows very large over time. My hope is that through your financial journey that your small investment in time, money and faith will grow beyond anything that you could ever imagine.



56 Comments

  1. These numbers are slightly less depressing but still not good. I just don’t understand how people can work for 40+ years to only end up with such little savings. I wonder what a good solution would be? It is like people need an immediate short-term benefit to saving or they just won’t do it.
    Grant @ Life Prep Couple recently posted…GUEST POST: A UNIQUE GIFTMy Profile

    • Not that it would ever get passed, but it would be interesting to see what would happen if the government forced people to invest more into their tax advantaged accounts. I’m sure it would affect the economy so it’ll never happen but it would be fun to see.

  2. Good call on distinguishing between average and median balances. Regarding the Roth vs traditional ratio, I suspect it’s because the Roth IRA had only been around since the 90s. A while generation had only had the traditional option, most of whom won’t bother switching.

  3. My IRA is a rollover, so it has more than my Roth. I put money into both 401k and Roth to have both tax benefits now & later. I roll each 401k into the rollover IRA when a job ends.
    While having $200,000 at retirement is better than not, that’s only 5 years at $40,000 per year. I am very grateful that my parents saved and invested well, and I don’t have to worry about them wanting to move in with me because they ran out of money.

    • Thanks for sharing Jacq!!! I have definitely heard from people in the sandwich generation that are worried about the future. Taking care of mom/dad and kiddos is definitely not going to be easy.

    • Thanks for stopping by Leo!!! It’s definitely a nice benchmark to set up for yourself down the line. It’s even easier to reach these benchmarks when you start early 🙂

  4. Great analysis! I like that you interject all the numbers and figures with interesting quotes. Stats can be powerful yet misleading until we dive into how people got those stats in the first place.

    Mr. FAF just started his new job. And we decided to max out this 401(k) for the year while using my income to pay off our mortgage!
    Ms. Frugal Asian Finance recently posted…How To Deal With Spousal EnvyMy Profile

  5. I’m not surprised but definitely a bit worried. So many people are short-sighted and are sacrificing their future financial goals by so much short-term spending.

    On Facebook yesterday I was pictures of a family throwing a huge party for their elementary age child. Big bouncy, cotton candy machine, other rented “toy” items. It must have cost a bundle. I know this same family is worried about paying for college for their multiple children – they’ve made that comment to me before.

    It seems that the average American has this same mindset – and short term actions.
    Brad – MaximizeYourMoney.com recently posted…How to Become a Millionaire By Investing ConsistentlyMy Profile

    • I’ll never understand that. I want my kid to have a fantastic childhood but at what cost. I personally would much rather have the savings from that party in my 529 than a party I’ll barely remember. But I guess that’s why everyone can make choices 🙂

  6. I am pleasantly surprised by the account balances for the younger crowd. With average balances for the Traditional and Roth IRAs above $10k each for the group under 30, they are positioning themselves nicely for retirement!

  7. The balances seem low but most people have a combination of a 401k, 403b, IRA, traditional investment account, and/or real estate. Once you think of all of those things together things aren’t so bleak. Personally, we have a 401k and IRA.

    Very insightful looking through the numbers!

  8. It’s important for people to xfer there IRA over as soon as they are able to when switching jobs. You’re losing out on free money if the company matches every pay period. If you’re working, your money should be working too. I feel not many people know the differences between traditional and Roth IRA.
    SMM recently posted…Don’t Be Afraid of the Stock MarketMy Profile

    • I definitely agree!! I don’t think there is enough education around this. Companies certainly aren’t taking the time since if you aren’t being productive for them you’re not helping them 🙂

  9. Interesting post. I am not surprised by the low balances. The ammont that you can contribute to an IRA is much lower than a 401K. When I started investing in the 90’s it was only $2k. As you mentioned, Another reason that the traditional IRA balances are larger is when retirees roll over their 401k into a TIRA.
    Dave recently posted…Frugal, not CheapMy Profile

    • I totally agree with you Jeff!!! I’d love to see the numbers much higher. Although contribution levels at $5.5k right now make it difficult to really have the upward push. I’d love to see the caps removed completely.

  10. Great information you’re sharing Rob. I’m not too surprised at the balances as I’ve been worried for a while about the Gen X’ers and Boomers. Fortunately, we are doing well in comparison. Now to just get these others motivated to save and invest more.

  11. Maybe everyone should be given $1000 when they turn 18 and it goes into a life cycle fund. They can add to it, but can’t withdraw till 59 and a half. This would let them see the benefits early. Less of a waste than a lot of goverment programs.

  12. I’m surprised too that not many people are invested in a Roth. Probably because they are not informed enough of the benefits like you don’t have to pay taxes when you start withdrawing money from a Roth unlike a Traditional IRA. Hopefully soon more will be aware of the tax benefits of a Roth so they can open one and contribute right away!!
    Kris recently posted…Book Review: The Millionaire Next DoorMy Profile

  13. My IRA was a rollover from my previous employer’s 401k. I was given the option to leave the money to my 401k account but decided to roll it over to a traditional IRA account and manage it myself. Excellent decision up to this writing. I feel bad though for the other workers who could not afford to contribute to either IRA or 401k. There are people with zero IRA’s and 401k’s. I happen to know a few of them and one of them is already in her 50’s.

  14. I am also not surprised by the low numbers and I fully admit I struggle with putting the full amount into my Roth IRA. I max out my 403b and I have a 401(a). And whatever contributions I do make to my Roth IRA they come from my Fidelity Rewards card (I would need a lot of spending to get to $5500). However, I would like to make putting money in their a bigger priority I guess I just have to do it.
    Jason recently posted…Another Housing Blues PostMy Profile

    • Thanks for sharing Jason!!! Sounds like you are doing an awesome job if you are maxing out your 403b!!! That’s not easy to do and you are definitely in rare company 🙂

Leave a Reply

Your email address will not be published. Required fields are marked *

CommentLuv badge