It could help relieve at least a little pressure on the retirement crisis, but the IRA just isn't the thing for most people. And lots of them stay away from them because they just don't know enough.
According to a survey from TIAA, the chief reason more people don't own an IRA is simply the reason there's a retirement crisis in the first place: lack of money.
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A whopping 46 percent of respondents say they don't have enough money to save more than they already do.
But then there's the question of actually understanding what an IRA is and how it works, and there are plenty of people who don't—hence their avoidance.
Twenty-eight percent of respondents say they don't know enough about them to invest in one—that's overall, with GenY even less clear about them, with 37 percent pleading ignorance. In addition, 17 percent overall say they're too complicated.
But maybe it's time for people to conquer their ignorance; 91 percent of current IRA contributors say they're confident about their retirement savings, while just 64 percent of those who don't contribute to an IRA feeling the same way.
Of course, it's not as if those who have IRAs necessarily put a lot of money into them; among survey respondents who do have an IRA, close to a fifth contribute less than $250 each year.
And it could be due simply to making other choices, at least among those who have the resources to set aside more for retirement. Although a majority of IRA owners do contribute more than $1,000 a year to their IRAs, only 5 percent contribute more than $5,000 a year even though IRAs have an annual contribution limit of $5,500.
And 8 percent of those with that kind of money spend it instead on vacations.
Not only do they not understand the potential tax benefits of IRAs, they aren't efficient in using them.
Forty-four percent of those surveyed say they don't know about the tax benefits or don't understand them (only 43 percent of GenY workers say they know about and understand the tax benefits and how they work).
And despite the fact that 70 percent of respondents overall say they are aware of them, just 54 percent say they actually understand them.
But among those who don't have one and don't know about the tax advantages two in five say they'd be more likely to consider one after learning about them.
And they don't use them for rollovers, either. Although 30 percent of those who didn't roll over a former employer's retirement plan said it was due to satisfaction with the plan, many others don't for other reasons.
Seventeen percent say they didn't know what they should do; 17 percent didn't know they could; 13 percent don't have time and 9 percent think the process is too complicated.
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