Individual Retirement Account (IRA) Ownership: Data and Policy Issues

Individual Retirement Account (IRA) Ownership: Data and Policy Issues

Individual Retirement Account (IRA)
December 9, 2020
Ownership: Data and Policy Issues
Elizabeth A. Myers
Retirement income in the U.S. can come from multiple sources—Social Security, savings in
Analyst in Income Security
employer-sponsored plans (e.g., public and private defined benefit plans and defined contribution

plans), and private savings (e.g., annuities, other investments, individual retirement accounts
[IRAs]). This report focuses on IRAs, which are tax-advantaged accounts for individuals to save

for retirement. In 2019, about 25% of U.S. households owned IRAs.
IRAs were first authorized by the Employee Retirement Income Security Act of 1974 (ERISA; P.L. 93-406) for two reasons:
(1) to encourage workers without access to employer-sponsored plans to save for retirement and (2) to allow workers with
employer plans to roll over their savings and retain tax advantages. Though eligibility was originally limited to workers
without pension coverage, subsequent legislation expanded eligibility to nearly all workers. In 1997, Congress authorized a
new type of IRA—the Roth IRA.
Traditional and Roth IRAs differ based on their tax treatment. Contributions to traditional IRAs may be deductible from
taxable income while withdrawals are included in taxable income. Contributions to Roth IRAs are not deductible, but
qualified withdrawals are not included in taxable income; investment earnings grow tax free.
IRAs are funded by contributions and rollovers. Contributions are subject to an annual limit . In 2020, this limit is $6,000
($7,000 for individuals ages 50 and over). A rollover occurs when assets are transferred from one retirement plan, such as an
employer-sponsored 401(k), to another. Rollovers are not subject to the contribution limit. Most inflows to traditional IRAs
are from rollovers, while most inflows to Roth IRAs are from contributions.
Individuals with IRAs can choose their investments based on options provided by their financial institutions. Contributions,
rollovers, and any investment earnings can be used as a source of income in retirement. To discourage IRA owners from
withdrawing funds prior to retirement, the Internal Revenue Code imposes a 10% penalty on most early withdrawals, with
several exceptions outlined in Title 26, Section 72(t), of the United States Code. Aside from these exceptions, Congress has
temporarily exempted early IRA withdrawals from the penalty following certain past events, including multiple natural
disasters and, most recently, the Coronavirus Disease 2019 (COVID-19) pandemic.
After reaching age 72, individuals with traditional IRAs must begin taking annual distributions (i.e., withdrawals), known as
required minimum distributions (RMDs), from their accounts. Individuals with Roth IRAs are not subject to RMDs, though
individuals who inherit Roth IRAs may be.
IRA ownership varies based on demographic and socioeconomic characteristics, with higher ownership rates for older, more
educated, and higher-income households. Among IRA owners, younger households have higher rates of Roth IRA ownership
compared to traditional IRA ownership, while older households have higher rates of traditional IRA ownership.
Stakeholders and policymakers have expressed concern that not enough households have adequate retirement savings due to
either a lack of access or participation, inadequate contributions, or early withdrawals from accounts (also known as
leak ages) and have considered various policy options that may address these issues. This report first provides background
information on IRAs, including a discussion of their tax treatment and relationship with savings behavior, along with data on
IRA ownership, contributions, withdrawals, and savings adequacy. It then outlines policy options that might address some of
the issues surrounding IRAs. Among others, these options include:
 modifications to the Retirement Savings Contribution Credit;
 implementation of lifetime income disclosures;
 an increase in the age at which the 10% early withdrawal tax penalty applies; and
 an increase in the age after which RMDs must begin for traditional IRA owners.
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Contents
Introduction ................................................................................................................... 5
Background.................................................................................................................... 6
Legislative History of IRAs......................................................................................... 8
Traditional IRAs........................................................................................................ 9
Roth IRAs .............................................................................................................. 10
Rollover and Inherited IRAs...................................................................................... 10
Assets in IRAs ........................................................................................................ 12
Tax Expenditures, Benefits, and Savings Behavior ........................................................ 12
IRA Tax Expenditures ......................................................................................... 13
Equivalence of Traditional and Roth IRAs ............................................................. 14
IRAs and Savings Behavior ................................................................................. 15
IRA Tax Preferences: Who Benefits? ..................................................................... 16
Ownership of Individual Retirement Accounts ................................................................... 17
Data on IRA Ownership............................................................................................ 17
IRA Ownership and Account Balances by Household Characteristic in 2019 ............... 18
IRA Ownership by IRA Type ............................................................................... 20
Characteristics of Households Based on IRA Ownership .......................................... 21
IRAs and Perceived Retirement Income Adequacy .................................................. 26
Increasing IRA Ownership: Policy Options and Considerations ...................................... 26
Clarify Treatment of State-Administered Retirement Savings Programs ...................... 28
Authorize Automatic IRAs at the Federal Level ...................................................... 28
Eliminate the Roth IRA Income Threshold ............................................................. 29
Contribution Amount and Savings Accumulation ............................................................... 30
Data on IRA Contributions........................................................................................ 30
Data on IRA Investments .......................................................................................... 34
IRAs and Portfolio Rebalancing ........................................................................... 34
IRA Savings Accumulation: Policy Options and Considerations...................................... 35
Modify Saver’s Credit......................................................................................... 35
Modify Contribution Limits ................................................................................. 36
Modify Deductibility of Traditional IRA Contributions ............................................ 37
Implement Lifetime Income Disclosures ................................................................ 37
Leakages from IRAs...................................................................................................... 38
Data on Early Withdrawals from IRAs ........................................................................ 39
Leakages from IRAs: Policy Options and Considerations............................................... 40
Permit IRA Loans............................................................................................... 41
Allow Recontributions for Certain Withdrawals ...................................................... 41
Increase Age Before Which 10% Penalty Applies .................................................... 41
Asset Drawdown........................................................................................................... 42
Data on Asset Drawdown Patterns and Annuities for IRA-Owning Households ................. 43
IRA Asset Drawdown: Policy Options and Considerations ............................................. 43
Increase Age to Begin Taking RMDs from Traditional IRAs ..................................... 44
Eliminate RMD for Certain Traditional IRA Owners................................................ 44
Modify Rules Surrounding QLACS ...................................................................... 45

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Figures
Figure 1. U.S. Retirement Income...................................................................................... 6
Figure 2. U.S. Retirement Assets (in trillions), Q4 of 2019 .................................................. 12
Figure 3. Percentage of Households in 2019 with an IRA Balance, Defined Contribution
(DC) Account Balance, or a Defined Benefit (DB) Pension ............................................... 25

No table of figures entries found.
No table of figures entries found.
Tables
Table 1. Legislative History of Individual Retirement Accounts.............................................. 9
Table 2. Overview of Traditional and Roth IRA Features ..................................................... 11
Table 3. Traditional and Roth IRA Tax Expenditure Estimates, FY2019-FY2023 .................... 13
Table 4. Percentage of Households with IRA Contributions in 2018 ...................................... 16
Table 5. IRA Ownership and Account Balances by Household Characteristic in 2019 .............. 19
Table 6. IRA Ownership by IRA Type in 2019 ................................................................... 21
Table 7. Characteristics of Households Based on IRA Ownership in 2019 .............................. 22
Table 8. Perceived Retirement Income Adequacy Based on Net Worth and IRA
Ownership................................................................................................................. 26
Table 9. Contributions to Traditional and Roth IRAs in 2017 ............................................... 33

No table of figures entries found.
Table A-1. Deductibility of Traditional IRA Contributions for Individuals Not Covered by
Retirement Plans at Work for 2019 and 2020 .................................................................. 46
Table A-2. Deductibility of Traditional IRA Contributions for Individuals Covered by
Retirement Plans at Work for 2019 and 2020 .................................................................. 46
Table B-1. Roth IRA Eligibility and Contribution Limits in 2019 and 2020 ............................ 47
Table C-1. Equivalence of Traditional and Roth IRA Distributions........................................ 48
Table D-1. Retirement Savings Contribution Credit in 2019 and 2020 ................................... 50

Appendixes
Appendix A. Traditional IRA Deductibility Rules............................................................... 46
Appendix B. Roth IRA Eligibility and Contribution Limits .................................................. 47
Appendix C. Equivalence of Traditional and Roth IRAs ...................................................... 48
Appendix D. Retirement Savings Contribution Credit ......................................................... 50

Contacts
Author Contact Information ............................................................................................ 50

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Individual Retirement Account (IRA) Ownership: Data and Policy Issues

Introduction
Congress has provided various tax incentives to encourage individuals to save for retirement. Tax
incentives exist for employers to offer retirement plans and for employees to participate in these
plans, as wel as for individuals to save outside of employer-sponsored plans through Individual
Retirement Accounts (IRAs). IRAs—tax-advantaged savings accounts for individuals that are not
tied to employers—were first authorized by the Employee Retirement Income Security Act of
1974 (ERISA; P.L. 93-406). ERISA specified that IRAs be available to workers without employer
pension coverage. In addition, ERISA permitted individuals with savings in employer plans to
roll over these amounts to newly established IRAs, preserving their tax benefits.1 Contributions to
IRAs (now known as traditional IRAs) are deductible from taxable income for certain
households, and taxation on contributions and any earnings are deferred until withdrawal.
The Roth IRA, introduced in 1997, permits certain households to make non-deductible
contributions and receive withdrawals tax-free in retirement. Despite the difference in timing of
taxation, traditional and Roth IRAs provide equivalent amounts to spend in retirement under
certain assumptions.2
IRAs are funded by contributions and rollovers. Traditional and Roth IRA contributions are
subject to an annual limit: $6,000 ($7,000 for individuals ages 50 and over) in 2020.3 In 2017,
half of individuals who contributed to their traditional IRAs made the maximum contribution,
compared to over one-third of individuals who contributed to their Roth IRAs. A rollover occurs
when assets are transferred from one retirement plan, such as a 401(k), to another. Rollovers are
not subject to the contribution limit.
Amounts that are withdrawn from IRAs prior to retirement are general y referred to as leakages
and could represent a loss to retirement savings. Leakages can occur when an individual
withdraws funds for a specific reason (e.g., higher education or medical expenses) or during the
rollover process. Pre-retirement withdrawals (i.e., those taken before age 59½, death, or
disability) face a 10% tax penalty unless an exception in Title 26, Section 72(t), of the U.S. Code
applies.
The optimal strategy for withdrawing IRA and other assets in retirement can be a chal enging task
for many households. Some households base their strategy on the annual required minimum
distributions (RMDs), while others purchase annuities. Nearly al IRA-owning households
receive monthly Social Security benefits, likely insulating them from being without income in
retirement.
This report provides background information on traditional and Roth IRAs, including a legislative
history, description of assets in IRAs, and a discussion of IRA tax incentives and retirement
savings. The report also analyzes policy issues and options related to IRA ownership, savings
accumulation, leakages, and asset drawdown by using tabulations from the Internal Revenue

1 Congressional discussions cited increasing mobility of the workforce as reason for this provision. Prior to rollovers
into IRAs, employees who changed jobs may have been able to transfer assets from one employer plan to another,
provided both employers agreed to the transfer. See Congressional Record, vol. 120, part 4 (February 26, 1974), p.
4300.
2 T hese assumptions include identical marginal tax rates at the time of contribution and withdrawal, the same rate of
return on investments, and the same time period from contribution to withdrawal.
3 T he contribution limit applies to all of an individual’s IRAs (e.g., an individual with a traditional IRA and a Roth IRA
could contribute $3,000 to each without exceeding the $6,000 limit). Defined contribution plans, such as 401(k) plans,
are subject to a higher contribution limit.
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Individual Retirement Account (IRA) Ownership: Data and Policy Issues

Service (IRS) Statistics of Income division and the Investment Company Institute (ICI) data and
analysis of the Federal Reserve’s Survey of Consumer Finances (SCF).
Background
Retirement income in the United States can come from three main sources: Social Security,
employer-sponsored pensions, and private savings (Figure 1).4 IRAs—a component of private
savings—accounted for nearly one-third of total U.S. retirement assets at the end of 2019.5 U.S.
retirement assets included public and private defined benefit (DB) plans, defined contribution
(DC) plans, annuities, and IRAs.6 In 2019, about 25% of U.S. households owned IRAs.7
Figure 1. U.S. Retirement Income

Source: Congressional Research Service.
IRAs are tax-advantaged retirement savings accounts for individuals and are regulated at the
federal level. IRAs may be offered only by either banks or “such other person who demonstrates

4 For an overview of Social Security, see CRS Report R42035, Social Security Primer. For information on employer-
sponsored plans, see CRS Report R43439, Worker Participation in Em ployer-Sponsored Pensions: Data in Brief; or
CRS Report R46366, Single-Em ployer Defined Benefit Pension Plans: Funding Relief and Modifications to Funding
Rules.
5 ICI, The US Retirement Market, Fourth Quarter 2019, T able 1, https://www.ici.org/research/stats/retirement/. Social
Security assets are not included in the definition of U.S. retirem ent assets. An annuity is a stream of monthly payments
in exchange for a lump sum dollar amount, generally purchased through an insurance company or purchased over time
as part of an investment option.
6 ICI, The US Retirement Market, Fourth Quarter 2019, T able 1.
7 CRS analysis of the Federal Reserve’s 2019 SCF. T he SCF is a triennial survey conducted on behalf of the Board of
Governors of the Federal Reserve and contains detailed information on U.S. household finances, such as the amount
and types of assets owned and the amount and types of debt owed, and detailed demographic information on the head
of the household and spouse.
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Individual Retirement Account (IRA) Ownership: Data and Policy Issues

to the satisfaction of the Secretary [of the Treasury] that the manner in which such other person
wil administer the trust wil be consistent with the requirements of this section.”8 IRAs are
commonly set up through banks, credit unions, mutual funds, life insurance companies, or stock
brokerages.
IRAs are funded by individual contributions—which must general y be from earned income—and
rollovers of individual savings from employer-sponsored plans, such as a 401(k) plan. Account
owners choose how to invest their savings from an array of investment choices offered by the
financial institution, such as stocks, bonds, and mutual funds.9
IRAs differ from employer-sponsored DC plans—such as 401(k)s, 403(b)s, 457(b)s, and the
federal government’s Thrift Savings Plan (TSP)—in several ways.10 First, IRAs are independent
of employers and have different withdrawal rules than DC plans.11 For example, individuals may
withdraw funds from IRAs for any reason, while withdrawals from DC plans prior to retirement
(1) must be al owed by the plan and (2) must be for a specified hardship reason. Pre-retirement
withdrawals from IRAs and DC plans may be subject to a 10% penalty unless an exception
applies.12
In addition, IRAs have lower contribution limits than do DC plans. In 2020, the maximum annual
contribution to an IRA is $6,000 ($7,000 for individuals aged 50 and older), while that for a DC
plan is $19,500 ($26,000 for individuals aged 50 and older). In addition to higher contribution
limits, DC plans sometimes feature an employer match, in which an employer contributes to an
employee's account based on the employee's contribution levels.13 Final y, IRAs may have higher
fees than DC plans do: DC plan sponsors are required by regulation to disclose fees paid on an
annual basis, while IRA providers are not required to report fees paid during the year in a
participant’s annual report.14
IRAs are broadly classified as traditional or Roth based on their federal income tax treatment.15
This report provides data on ownership of traditional and Roth IRAs and highlights policy issues
and options surrounding IRA ownership. For more information on rules relating to eligibility,

8 See 26 U.S.C. §408(a)(2). T itle 26, Section 409(n), of the Code describes a bank as (1) a bank described in T itle 26,
Section 581, (2) an insured credit union, (3) or a corporation that is subject to the supervision of the commissioner of
bank (or similar office) in a state.
9 Some IRA providers do not restrict investment types in IRAs. T hese IRAs are referred to as self-directed IRAs.
10 Private sector employers can establish 401(k) plans; 403(b) plans are for certain employees of public schools,
employees of certain tax-exempt organizations, and certain ministers; 457(b) plans are for state or local governments or
a tax-exempt organizations under Section 501(c) of the Internal Revenue Code. Federal government employees are
enrolled in the T SP.
11 T here are also employer-sponsored IRAs, such as SEP IRAs, SARSEPs, and SIMPLE IRAs. Employer -sponsored
IRAs are not discussed in this report.
12 For example, exceptions apply to qualified higher education expenses, qualified first -time homebuyers, and health
insurance premiums paid while unemployed. See IRS, “Retirement T opics—Exceptions to T ax on Early Distributions,”
https://www.irs.gov/retirement -plans/plan-participant -employee/retirement-topics-tax-on-early-distributions.
T emporary exceptions also apply to distributions for residents affected by certain natural disasters or other situations,
such as COVID-19. See Appendix in CRS Report RL34397, Traditional and Roth Individual Retirem ent Accounts
(IRAs): A Prim er.
13 DC plan contributions may come from employers only, employees only, or both.
14 See 29 C.F.R. §2550.404a-5. Fees may be charged for opening, maintaining, and closing an IRA and for purchasing,
maintaining, and selling investments within the IRA. IRA fees must be disclosed upon opening an IRA. Fees are based
on the account’s investment types.
15 Roth IRAs are named for former Senator William Roth.
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contributions, and withdrawals from IRAs, see CRS Report RL34397, Traditional and Roth
Individual Retirement Accounts (IRAs): A Primer.
Legislative History of IRAs
Following ERISA’s authorization of IRAs for workers without pension coverage in 1974 (and for
workers with employer-sponsored plans to roll over savings), the Economic Recovery Act of
1981 (P.L. 97-34) expanded the availability and deductibility of IRAs to al workers and spouses,
including those covered by employer-sponsored pension plans. It also increased contribution
limits from $1,500 to $2,000.
Contributions were fully deductible for al IRA owners until 1987. The Tax Reform Act of 1986
(P.L. 99-514) phased out IRA deductibility for individuals based on household income and
employer-sponsored pension coverage.
The Taxpayer Relief Act of 1997 (P.L. 105-34) authorized the Roth IRA, which al owed
individuals to make non-deductible contributions and then receive these contributions and any
investment earnings tax-free in retirement. It also al owed for certain penalty-free withdrawals for
higher education and first-time homebuyers.16
The Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L. 107-16) increased IRA
contribution limits from $2,000 to $3,000, provided for additional catch-up contributions for
individuals aged 50 and older, and temporarily indexed these contribution limits to inflation. It
also provided for a temporary non-refundable tax credit—the Retirement Savings Contribution
Credit, or Saver’s Credit—for taxpayers with earnings under specified thresholds who contribute
to retirement savings accounts.17
The Pension Protection Act of 2006 (P.L. 109-280) made permanent the Saver’s Credit and the
indexing of contribution limits to inflation. It also indexed income limits for the Saver’s Credit to
inflation.
Prior to 2010, individuals with income above a specified threshold were unable to convert savings
in a traditional IRA to a Roth IRA. The Tax Increase Prevention and Reconciliation Act of 2005
eliminated this income restriction for conversions starting in 2010.
Most recently, the Setting Every Community up for Retirement Enhancement Act of 2019
(SECURE Act, enacted as Division O of the Further Consolidated Appropriations Act of 2020
[P.L. 116-94; December 20, 2019]) included multiple provisions that affect IRAs.18 These include
repealing the maximum age to contribute to a traditional IRA (previously 70½), increasing the
age after which mandatory withdrawals begin from 70½ to 72, and modifying distribution rules
for inherited accounts. Table 1 outlines IRA-related legislation that is relevant to information in
this report.19

16 26 U.S.C. §72(t)(E) and 26 U.S.C. §72(t)(F). Distributions of up t o $10,000 for acquisition costs for first -time
homebuyers (i.e., individuals who had no present interest in a main home during the two years prior to acquiring a new
home) are not subject to the penalty.
17 For more information on the Saver’s Credit, including a discussion of its effectiveness in supporting low-income
taxpayers, see CRS In Focus IF11159, The Retirem ent Savings Contribution Credit.
18 For more information on a provision in the SECURE Act, see CRS In Focus IF11328, Inherited or “Stretch”
Individual Retirem ent Accounts (IRAs) and the SECURE Act.
19 Not all IRA-related legislation is discussed in this report. For example, information about qualified charitable
distributions from IRAs and spousal IRAs is not included in Table 1 or this report. See CRS In Focus IF11377,
Qualified Charitable Distributions from Individual Retirem ent Accounts.
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Table 1. Legislative History of Individual Retirement Accounts
Legislation related to IRA availability, deductibility, and contributions
Public Law
Provision(s)
Employee Retirement Income Security
Established IRAs to al ow workers without access to employer-
Act of 1974 (P.L. 93-406)
sponsored plans to save for retirement and for individuals with
employer-sponsored plans to rol over savings and preserve their tax
advantages; permitted contributions to be deducted from taxable income
Economic Recovery Act of 1981 (P.L.
Expanded IRA availability to al workers under age 70½, increased annual
97-34)
contribution limits from $1,500 to $2,000
Tax Reform Act of 1986 (P.L. 99-514) Introduced income restrictions for deductibility of contributions, al owed
non-deductible contributions for individuals above income limit
Taxpayer Relief Act of 1997 (P.L. 105-
Introduced the Roth IRA, al owed for penalty-free withdrawals for
34)
higher education and first home purchase expenses
Economic Growth and Tax Relief
Increased contribution limits, added a “catch-up” contribution provision
Reconciliation Act of 2001 (P.L. 107-
for individuals 50 or older, temporarily indexed contribution and catch-
16)
up contribution limits to inflation, introduced the Retirement Savings
Contribution Credit
Tax Increase Prevention and
Removed income restriction on converting traditional IRAs to Roth IRAs
Reconciliation Act of 2005 (P.L. 109-
in 2010
222)
Pension Protection Act of 2006 (P.L.
Made permanent the Retirement Savings Contribution Credit (and
109-280)
indexed income thresholds to inflation), permanently indexed
contribution limits to inflation
Setting Every Community up for
Increased the age after which required distributions must begin (from
Retirement Enhancement Act of 2019
70½ to 72), eliminated the age restriction to contribute to traditional
(SECURE Act; P.L. 116-94)
IRAs, modified distribution rules for beneficiaries who inherit IRAs
Source: Congressional Research Service.
Notes: The Retirement Saving Contribution Credit is a nonrefundable tax credit for individuals with income
under specified thresholds who contribute to retirement accounts.
Traditional IRAs
Traditional IRAs are funded by workers’ contributions or rollovers. Traditional IRA contributions
are tax deductible for taxpayers who (1) are not covered by workplace retirement plans and (2)
are covered by workplace retirement plans but have income below specified limits. Spousal
income and pension coverage, if applicable, may affect an individual’s ability to deduct
contributions. Appendix A details traditional IRA deductibility rules.20
Individuals can also fund IRAs by rolling over savings from workplace retirement plans or other
IRAs. Rollovers preserve the tax benefits of retirement savings. Rollovers are classified as (1)
direct transfers, (2) trustee-to-trustee transfers, and (3) 60-day rollovers.21 Individuals who roll

20 Individuals not eligible to deduct traditional IRA contributions may still make contributions to what is referred to as
non-deductible traditional IRAs. Income on earnings is deferred, and earnings are included in taxable income upon
withdrawal.
21 In direct transfers and trustee-to-trustee transfers, funds are moved directly from one account to another or the
individual receives a check made payable to the new account. In 60 -day rollovers, an individual receives a distribution
made payable to the individual and can then transfer part or all of the distribution to another retirement plan within 60
days.
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amounts from one IRA to another using the 60-day rollover method may only do so once per 12-
month period.22 Rollovers are not subject to annual contribution limits.
IRA account balances can accrue investment earnings, and the contributions and any investment
earnings can be used as a source of income in retirement. The benefits of traditional IRAs
compared to placing funds in taxable accounts include the ability to (1) make pretax
contributions, which provide larger bases for accumulating investment earnings and, thus, provide
larger account balances at retirement than if the money had been placed in taxable accounts; and
(2) defer taxes, meaning that taxes are paid when funds are distributed. If an individual’s income
tax rates in retirement are lower than during working life, traditional IRA holders wil pay less in
taxes when contributions are withdrawn than when the income was earned.23
Roth IRAs
Authorized in 1997, Roth IRAs are an alternative to the traditional IRA that differ in terms of
eligibility, tax treatment, and withdrawal flexibility. Unlike traditional IRAs, Roth IRAs have
income eligibility limits: Individuals with earnings above specified thresholds are ineligible to
contribute. In 2020, this threshold is $139,000 for single filers and $206,000 for married couples
filing jointly. Contribution limits are phased out for individuals approaching the income
thresholds. Redesignations of traditional IRA assets as Roth IRA assets—known as
conversions—are not subject to income limits.24
Contributions to Roth IRAs are not tax deductible. Qualified distributions of contributions and
any investment earnings are not included in taxable income. Qualified distributions are those
made (1) after age 59½, death, or disability and (2) from accounts that are at least five years old.
In contrast to traditional IRAs, individuals with Roth IRAs can withdraw their original
contributions at any time and for any reason, penalty-free. Non-qualified withdrawals of
investment earnings may be subject to tax and penalty.
If income tax rates are higher in retirement than during working life, Roth IRA holders wil pay
less in taxes when income is earned than when contributions are withdrawn. Appendix B outlines
Roth IRA eligibility requirements and contribution limits.
Rollover and Inherited IRAs
Individuals may refer to owning a rollover or inherited IRA. A rollover IRA refers to an IRA that
was funded by savings from one’s own employer-sponsored retirement plan. An inherited IRA
refers to an account that a beneficiary inherited from a deceased account owner.25 Rollover and
inherited IRAs can be traditional or Roth IRAs depending on the type of the previous account.
Individuals can contribute to their rollover IRA after rolling over funds from employer-sponsored
plans. The same contribution and withdrawal rules that apply to traditional or Roth IRAs apply to

22 For more information on the one-rollover-per-year rule, see IRS, “IRA One-Rollover-Per-Year Rule,”
https://www.irs.gov/retirement -plans/ira-one-rollover-per-year-rule.
23 T axpayers might also consider the time value of money. If tax rates are identical at the time of contribution and
withdrawal, the taxpayer might still prefer to pay taxes in the future rather than the present because taxes paid in the
future are less, in present value terms, than the same amount paid today.
24 T he amount converted is taxed as income.
25 A nonspouse beneficiary cannot take ownership of an inherited account. Instead, the account becomes an inherited
IRA designated for the nonspouse beneficiary in the name of the deceased account owner.
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rollover IRAs.26 Inherited IRAs are subject to several distinct rules. For example, individuals
cannot contribute to inherited IRAs, and individuals who inherit Roth IRAs may be required to
take annual RMDs (unlike original owners of Roth IRAs).27
Table 2 compares features of traditional and Roth IRAs.
Table 2. Overview of Traditional and Roth IRA Features
Feature
Traditional IRA
Roth IRA
Age limits for
None. Minor children may contribute
None. Minor children may contribute
contributing
provided they have earned income.a
provided they have earned income.a
Income limits for
No.
Yes. Contribution limits are reduced and
contributing
then phased out for taxpayers above
specified income thresholds (e.g., in 2020,
phase out begins at $124,000 for single filers
and $196,000 for married filing jointly).
Contribution
$6,000 in 2020 ($7,000 for individuals aged
$6,000 in 2020 ($7,000 for individuals aged
limits
50 and older).
50 and older).
Deductibility of
Deductible if individual (and spouse, if
Not deductible.
contributions
applicable) is not covered by an employer-
sponsored plan coverage. May be deductible
if covered by employer-sponsored plan
depending on filing status and income.
Early withdrawal
Subject to 10% penalty prior to reaching age
Contributions can be withdrawn penalty-free,
penalty
59½, death, or disability, unless reason for
but earnings withdrawn (1) prior to reaching
withdrawal meets an exception in 26 U.S.C.
age 59½, death, or disability and (2) from an
§72(t).
account that is not at least five years old are
subject to a 10% penalty unless reason for
withdrawal meets an exception in 26 U.S.C.
§72(t).
Required
Yes. An annual required minimum
No, though individuals who inherit Roth IRAs
withdrawals
distribution (RMD) must begin in the year
may be subject to RMDs.
fol owing the year in which an individual
turns age 72b.
Tax treatment of
Contributions and any earnings are taxable
Qualified distributions of contributions and
withdrawals
when withdrawn.
any earnings are received tax free.
Source: Congressional Research Service.
Notes: Total contributions to both a traditional IRA and a Roth IRA in the same year cannot exceed the $6,000
(or $7,000) contribution limit. For more information on IRA contribution and distribution rules, see IRS
Publication 590-A, https://www.irs.gov/pub/irs-pdf/p590a.pdf, and IRS Publication 590-B,
https://www.irs.gov/forms-pubs/about-publication-590-b.
a. A child under 18 may need a parent or guardian to set up a custodial account.
b. IRA owners are required to take RMDs regardless of work status. Individuals with DC plans may be able to
postpone RMDs until they retire.

26 Qualified retirement plans may, but are not required to, accept rollover contributions from other plans or IRAs.
27 T he SECURE Act (Division O of P.L. 116-94) modified distribution rules for inherited IRAs. Certain beneficiaries
who inherit account from account owners who die after December 31, 2019, are not subject to RMDs but must deplete
the entire account balance within 10 years. See CRS In Focus IF11328, Inherited or “Stretch” Individual Retirem ent
Accounts (IRAs) and the SECURE Act.
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Individual Retirement Account (IRA) Ownership: Data and Policy Issues

Assets in IRAs
At the end of 2019, there were $9.4 tril ion of assets in traditional IRAs and $1.0 tril ion of assets
in Roth IRAs.28 Combined assets in IRAs represented almost one-third of the $32.3 tril ion in
U.S. retirement assets in that year, which included public and private DB plans, DC plans,
annuities, and IRAs (Figure 2).29 DC plans represented about 28% of the assets, while DB plans
and annuities comprised the remaining 38%.30
Figure 2. U.S. Retirement Assets (in trillions), Q4 of 2019
Total assets of $32.3 tril ion

Source: Congressional Research Service representation of data from Investment Company Institute (ICI), The
US Retirement Market, 2nd Quarter 2020, Tables 1 and 10, https://ici.org/research/stats/retirement.
Notes: Numbers may not sum to total due to rounding. ICI estimated 2019 data. Employer-sponsored IRAs
include Simplified Employee Pensions (SEP), SAR-SEPs, and SIMPLE plans. Defined contribution plans include
private employer-sponsored DC plans—including 401(k) plans—403(b) plans, 457 plans, and the federal
government’s TSP.
Tax Expenditures, Benefits, and Savings Behavior
Tax provisions can encourage or discourage certain behaviors, such as saving for retirement. Tax
expenditures are revenue losses to the government due to special tax provisions.31 Tax
expenditures can be categorized as exclusions, deductions, deferrals, credits, or special tax rates.
Exclusions (not including amounts in taxable income) and deductions (reducing taxable income

28 See ICI, The US Retirement Market, Fourth Quarter 2019, T able 10.
29 ICI, The US Retirement Market, Fourth Quarter 2019, T able 1.
30 In DB plans, participants receive regular monthly benefit payments in retirement (which some refer to as a
"traditional" type of pension).
31 T he Congressional Budget and Impoundment Control Act of 1974 (P.L. 93-344) defined tax expenditures as
“revenue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or
deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability.”
For more information on tax expenditures, see CRS Report R44530, Spending and Tax Expenditures: Distinctions and
Major Program s.
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by an amount) decrease an individual’s taxable income and, therefore, reduce taxes owed to the
government. Credits, such as the Retirement Savings Contribution Credit, reduce tax liability
(i.e., the amount that an individual owes in taxes). Credits can be nonrefundable or refundable:
Nonrefundable credits can reduce tax liability to zero, while refundable credits provide a refund
to the taxpayer if the credit exceeds tax liability.
Since the IRA’s introduction in 1974, Congress has modified eligibility requirements,
contribution limits, and deductibility of contributions to encourage or limit its use for certain
groups of taxpayers. These changes may alter the government revenue that would have been
received in the absence of the provision. Any forgone revenue is referred to as a tax expenditure.
IRA Tax Expenditures
Tax expenditures for traditional IRAs—in which contributions may be deductible and
withdrawals are taxable—are recorded as deferrals. Tax liability and payment is deferred until a
point in the future (e.g., when an individual makes a withdrawal). Annual estimates of retirement
expenditures from the Joint Committee on Taxation (JCT) are calculated as the sum of revenue
loss due to the tax deduction for contributions in the current year minus the tax revenue from
distributions in the current year.32 Tax expenditures for Roth IRAs—in which contributions are
not tax deductible but withdrawals are tax free—are calculated as the forgone revenue on the
taxation of investment earnings.33
In FY2020, JCT estimated tax expenditures for traditional and Roth IRAs at $27.1 bil ion (Table
3).34 In comparison, tax expenditures for DB plans (both governmental and private sector) were
$96.5 bil ion, and those for DC plans were $145.1 bil ion.35
Table 3. Traditional and Roth IRA Tax Expenditure Estimates, FY2019-FY2023
Amounts in bil ions
Total FY2019-

FY2019
FY2020
FY2021
FY2022
FY2023
FY2023
Traditional IRAs
$18.2
$18.9
$19.9
$21.3
$22.5
$100.9
Roth IRAs
$7.7
$8.2
$8.7
$9.5
$10.4
$44.5
Total
$25.9
$27.1
$28.6
$30.8
$32.9
$145.4
Source: CRS representation of Joint Committee on Taxation, Estimates of Federal Tax Expenditures for Fiscal
Years 2019-2023, December 18, 2019, p. 30, https://www.jct.gov/publications/2019/jcx-55-19/.
Many factors contribute to the actual tax expenditure resulting from retirement savings (e.g., the
rate of return on investments and the difference in marginal income tax rates at the time of

32 See T ax Policy Center, “ How Large Are the T ax Expenditures for Retirement Saving?,”
https://www.taxpolicycenter.org/briefing-book/how-large-are-tax-expenditures-retirement-saving.
33 See CRS Committee Print CP10003, Tax Expenditures: Compendium of Background Material on Individual
Provisions — A Com m ittee Print Prepared for the Senate Com m ittee on the Budget, 2018, p. 1014. T his report explains
how Roth IRA tax expenditures are calculated generally. JCT may use a different or more specific calculation method.
34 T ax expenditures are calculated as “ the sum of the revenue loss attributable to the tax exclusion for current-year
contributions and earnings on account balances, minus the revenue from taxation of current -year pension and individual
retirement account distributions.” See JCT , Estim ates of Federal Tax Expenditures for Fiscal Years 2019 -2023,
December 18, 2019, p. 30, https://www.jct.gov/publications.html?func=startdown&id=5238 .
35 JCT , Estimates of Federal Tax Expenditures for Fiscal Years 2019 -2023, p. 30.
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contribution and withdrawal for any given individual). Some researchers have identified issues
with the calculation methods used by JCT and have proposed alternative methods.36
Equivalence of Traditional and Roth IRAs
A starting point for understanding traditional and Roth IRAs is to note that under certain
assumptions, traditional and Roth IRAs provide individuals with identical amounts to spend in
retirement. These assumptions include (1) identical tax rates at the time of contribution and
withdrawal and (2) equal investment growth in the traditional and Roth accounts.
Stylized examples may help il ustrate this concept. An individual who has $100 in pre-tax income
and faces a 25% tax rate could contribute $75 to a Roth IRA. Assume the investment doubles in
value to $150. In retirement, the qualified withdrawal would not be included in taxable income.
The individual would receive $75 plus $75 in investment earnings, or $150.
Alternatively, the same individual could contribute $100 to a deductible traditional IRA.37
Assume the investment doubles in value to $200. In retirement, the distribution would be taxed at
a 25% tax rate. The individual owes taxes of $50 (25% of the $100 contribution plus 25% of the
investment earnings). The individual would receive $75 plus $75 in investment earnings, or $150.
See Appendix C for another example of this equivalence. Note that because an individual’s
income tax rate in retirement is likely to be different than his or her tax rate while working, in
practice, traditional and Roth IRAs would probably not provide equal amounts in retirement.
IRA Tax Benefit
Traditional IRA tax benefits are structured as tax deferrals rather than tax deductions. A tax
deduction refers to a one-time reduction in taxable income. A deferral means that tax liability is
postponed to some point in the future, so even if an individual deducts contributions, the
individual must pay taxes on these contributions (and any earnings) at withdrawal. This implies
that the tax benefit of IRAs is not the up-front deduction but rather the difference between the
after-tax investment gains resulting from an IRA versus a taxable account. As described in the
previous section, traditional IRA tax deferral is equivalent to Roth IRA treatment under certain
assumptions. It follows that the tax benefit is also the same.
The benefit of contributing to an IRA rather than a taxable account (e.g., a mutual fund) for an
individual eligible to contribute to a traditional or Roth IRA depends on several factors. These

36 Researchers also identified issues with T reasury’s tax expenditure estimates for retirement savings. For example, see
Judy Xanthopoulos and Mary Schmitt, Retirem ent Savings and Tax Expenditure Estim ates, Retirement Saving
Association, September 2016,
https://www.asppa.org/sites/asppa.org/files/Comm_2016/16.09%20ARA%20Report%20 -
%20Retirement%20Savings%20and%20T ax%20Expenditure%20Estimates%20FINAL.pdf . T he authors state that
current tax expenditure measures overstate costs for provisions that defer taxes compared to provisions that
permanently reduce taxes (e.g., a tax credit). T he authors suggest that estimates should be made for groups based on
contribution level, age, and income to measure the effects of tax deferral (i.e., the benefit that results from taxpayers
facing a different tax rate in retirement compared to when the contributions are made) and the benefits of future
earnings (assuming a 4% rate of return).
37 An individual making a $100 deductible contribution to an IRA would, assuming a 25% tax rate, receive a $25 tax
deduction, effectively making the traditional IRA contribution equal to a $7 5 Roth IRA contribution. T he traditional
IRA contribution is a larger base on which investment earnings can accrue, so the account balance at withdrawal is
larger than that of a Roth IRA. Upon withdrawal, the individual would pay taxes on the traditional I RA distribution but
not on a Roth IRA distribution, so the after-tax distribution from each would be equivalent.
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include the rate of return on investments, the type of investment income (e.g., capital gains versus
dividends), and the time period over which investment earnings accrue.38
This tax benefit is often described as an effectively tax-free rate of return on investment earnings
and applies to both traditional and Roth IRAs.39
Continuing with the equivalence example from above, instead of contributing to an IRA, the same
individual could contribute to a taxable account. Because contributions to taxable accounts are
not deductible, the individual could put $75 into the account. The $75 would accrue investment
earnings, and—depending on the type—these earnings would be taxed annual y (in the case of
dividends) or when the investment is sold (capital gains).40 If investment earnings in the taxable
account accrue at the same rate as those in the traditional and Roth IRA example described
earlier, and the individual faces a 25% tax rate on these earnings annual y, the individual would
receive less in after-tax withdrawals when contributing to a taxable account compared to an IRA.
In practice, traditional and Roth IRA owners may receive an additional benefit if tax rates are
different at the time of contribution and withdrawal.41
IRAs and Savings Behavior
Retirement savings tax policy can cause individuals to save more or less than they otherwise
would in the absence of the policy.42 Retirement savings tax benefits increase the rate of return on
savings, which could affect individuals’ savings behavior. The higher return might cause
individuals to save more. Alternatively, instead of saving more, individuals could save less but
stil achieve the same level of saving. This would cause an increase in spending. In practice,
behavior is likely a combination of the two effects. Literature suggests that tax benefits might not
increase total savings but rather real ocate savings across different accounts.43
Absent tax incentives, individuals would likely stil save for retirement. Therefore, policymakers
who wish to increase retirement savings may wish to consider if a tax incentive would (1)
increase the number of individuals who save through IRAs that would otherwise not have saved
in the incentive’s absence and (2) increase the savings of individuals with IRAs above the level
that they would have saved in the incentive’s absence.

38 See Peter Brady, The Tax Benefits and Revenue Costs of Tax Deferral, ICI, 2012, pp. 4-5,
https://www.ici.org/pdf/ppr_12_tax_benefits.pdf.
39 Brady, The Tax Benefits and Revenue Costs of Tax Deferral. T he author points out that a more exact way to express
the effectively tax-free rate of return on investment earnings is to say that t he tax benefit is “ equivalent to facing a zero
rate of tax on the investment income that would have been generated if compensation was first subject to tax and the
net-of-tax amount was then contributed to an investment account.”
40 Investment earnings can include dividends, interest, capital gains, and others. Some earnings (e.g., dividends) are
taxed annually, while others are taxed when realized.
41 Note that the benefit might also depend on an individual’s eligibility (based on income and tax filing status) to deduct
contributions to a traditional IRA (see Appe ndix A).
42 See Congressional Budget Office, Tax Policy for Pensions and Other Retirement Saving, April 1987, Chapter 4,
https://www.cbo.gov/sites/default/files/100th-congress-1987-1988/reports/doc05-entire.pdf.
43 See John Friedman, Tax Policy and Retirement Savings, Brown University and NBER, January 30, 2016,
https://static1.squarespace.com/static/55693d60e4b06d83cf793431/t/59b7e660f22910a0c04f9def/1505224289048/FRI
EDMAN+retirement_tax_policy_submittedjan30.pdf; Orazio Attanasio, James Banks, and Matthew Wakefield,
Effectiveness of Tax Incentives to Boost (Retirem ent) Saving: Theoretical Motivation and Em pirical Evidence , Institute
for Fiscal Studies, 2004, https://www.econstor.eu/handle/10419/71528 .
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IRA Tax Preferences: Who Benefits?
There appears to be little research on the distribution of IRA tax benefits. Other research focuses
on retirement savings more general y. Some researchers believe that retirement savings tax
benefits largely benefit higher income groups because these groups are more likely to (1)
participate in retirement savings accounts, (2) contribute to retirement savings accounts, and (3)
benefit more per dollar of contribution due to higher marginal tax rates than lower-income
groups.44 These researchers found that households in the 80th to 99th percentile of the income
distribution received the largest retirement savings tax benefits as a share of pretax income.45
Others found that higher-income households benefit more than lower-income households do from
tax deferrals—not because they face higher marginal income tax rates but because they contribute
more dollars than lower-income households do.46
Table 4 describes the percentage of households—based on household income—that contributed
to IRAs in 2018 and the median contribution amount for contributing households. The percentage
of households with IRA contributions increased from 6.3% in the third quintile of household
income to 17.7% in the fifth quintile.47 Median IRA contribution amounts for contributing
households also increased across these quintiles. Contributing households in the third quintile had
a median contribution of $1,500 compared to $5,500 in the fifth quintile.
Table 4. Percentage of Households with IRA Contributions in 2018
Percentages represent the proportion of households in each income quintile
Percentage of Households
Median 2018 IRA
Quintile of 2018 Household
That Contributed to IRAs
Contribution for Contributing
Income (in 2019 Dollars)
Households
1st quintile ($0-$25,962)
n/aa
n/aa
2nd quintile ($25,963-$45,815)
n/aa
n/aa
3rd quintile ($45,816-$74,323)
6.3%
$1,500
4th quintile ($74,324-$127,265)
11.1%
$4,000

44 See Eric T oder, Surachai Khitatrakun, and Aravind Boddupalli, Tax Incentives for Retirement Savings, T ax Policy
Center, May 11, 2020, https://www.taxpolicycenter.org/sites/default/files/publication/159231/tax -incentives-for-
retirement -savings.pdf. T he researchers were referring to retirement savings in general, but findings are likely
separately applicable to IRA savings, because both 401(k)-type plans and traditional IRAs are based on tax deferral. In
March 2020, 21% of workers whose average wage fell into the lowest 25% of the wage distribution participated in a
DC retirement savings plan compared to 72% of employees who average wage fell into t he highest 25% of the wage
distribution. See U.S. Department of Labor, Bureau of Labor Statistics, National Com pensation Survey: Em ployee
Benefits in the United States, March 2020, T able 2: Retirement Benefits: Access, participation, and take-up rates,
private industry workers, https://www.bls.gov/ncs/ebs/benefits/2020/employee-benefits-in-the-united-states-march-
2020.pdf.
45 Bureau of Labor Statistics, National Compensation Survey, T able 2. In describing tax expenditures for DB and DC
plans, the researchers pointed out that contribution limits prevent taxpayers in the top 1% of the income distribution
from receiving the same benefit as a share of income than other higher-income taxpayers do. T he same is likely true of
IRA owners given the relatively lower contribution limits compared to DC plans, the phase -out of traditional IRA
deductibility, and the income threshold for Roth IRA eligibility.
46 See Peter Brady, How America Supports Retirement: Tackling the Myths That Surround Us, ICI, February 22, 2016,
https://www.ici.org/viewpoints/view_16_how_america_supports_01.
47 Sample sizes for IRA-contributing households in the first and second quintiles of household income were too small
for analysis.
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Percentage of Households
Median 2018 IRA
Quintile of 2018 Household
That Contributed to IRAs
Contribution for Contributing
Income (in 2019 Dollars)
Households
5th quintile ($127,266+)
17.7%
$5,500
Source: CRS analysis of the 2019 Survey of Consumer Finances.
Notes: Contributions to traditional, Roth, and rol over IRAs are included in the table.
a. Sample sizes of contributing households within these income categories were too smal for analysis.
When savings incentives are viewed in the broader context of the entire U.S. retirement system, it
has been observed that lower-income households benefit more from Social Security, while higher-
income households benefit more from tax deferrals, such as those in place for IRAs.48 As a result,
some researchers found that the U.S. retirement system as a whole (Social Security and tax-
deferred savings accounts) is progressive; households with lower lifetime earnings receive
proportionately higher benefits (based on lifetime earnings) from the U.S. retirement system as a
whole.49
Ownership of Individual Retirement Accounts
IRAs are nearly universal y available to workers. Any individual with compensation can establish
and contribute to one.50 Despite this widespread availability, the majority of U.S. households do
not own IRAs. Given that some workers have multiple choices surrounding retirement savings, it
is difficult to determine the necessity of IRAs for some households. While some workers choose
to save for retirement through employer-sponsored plans, other workers might be unaware of IRA
savings opportunities or may not have the financial means necessary to contribute to an IRA.
Data on IRA ownership may better inform policymakers who seek to increase IRA ownership—
either among al households or among certain groups of households.
Data on IRA Ownership
Survey of Consumer Finances (SCF)
Much of the analysis in this report uses data from the Federal Reserve’s 2019 SCF. The SCF is a triennial survey
conducted on behalf of the Board of Governors of the Federal Reserve and contains detailed information on U.S.
household finances, such as the amount and types of assets owned, the amount and typ es of debt owed, and
detailed demographic information on the head of the household and spouse. The SCF is designed to be national y
representative of the population of U.S. households, of which there were 128.6 mil ion in 2019. Household in the
SCF is defined as “the primary economic unit, which consists of an economical y dominant single individual or
couple (married or living as partners) in a household and al other individuals in the household who are financial y
interdependent with that individual or couple.”
While the SCF general y asks questions at the household level, questions related to IRAs and pensions are asked
separately of the head of the household and the spouse (if applicable). To determine household IRA ownership

48 See Peter Brady, How America Supports Retirement: No, Benefits Are Not “Tilted” to the Higher Earners, ICI,
February 23, 2016, https://www.ici.org/viewpoints/view_16_how_america_supports_02 . Lifetim e earnings was defined
as the present value of total compensation earned from ages 32-66.
49 Brady, How America Supports Retirement: No, Benefits Are Not “Tilted” to the Higher Earners.
50 Minor children with taxable compensation may contribute to an IRA, though a parent or guardian may have to set up
a custodial account. Compensation for the purposes of an IRA includes, for example, wages, salaries, commissions,
self-employment income, taxable alimony, and stipend and fellowship payments for students pursuing higher
education. Individuals and married couples with income above specified th resholds are not permitted to contribute to
Roth IRAs. T raditional IRAs do not have income limitations, but tax deductions are limited. See IRS, Publication 590 -
A, https://www.irs.gov/pub/irs-pdf/p590a.pdf.
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and account balances, CRS aggregated data for the head of household and any spouse. Any additional individual(s)
in the household with an IRA is not included in this analysis.
More information about the SCF, including the data and codebook, is available at
https://www.federalreserve.gov/econres/scfindex.htm. Because household wealth is highly concentrated, the SCF
includes an oversample of relatively wealthy households. Estimates in this report are adjusted using population
weights provided in the SCF dataset.
IRA Ownership and Account Balances by Household Characteristic in 2019
CRS analysis of the SCF indicated that 25.3% of households owned an IRA in 2019.51 IRS data
indicated that in 2017 (the most recent data available), 4.5 mil ion taxpayers contributed to a
traditional IRA, while 6.8 mil ion contributed to a Roth IRA.52
Table 5 provides data on the percentage of U.S. households with IRA accounts based on
household characteristics and the median and average account balance for these households in
2019.
Among IRA owners,
 the median account balance was $70,000, and
 the average account balance was $253,799.
IRA ownership rates in 2019 increased with household income and education level of the
household head. This is likely due to one or a combination of the following factors: (1) higher-
income households have a greater ability to save than lower-income households do, (2) higher-
income and higher-educated households may be more inclined to save for retirement than lower-
income or less educated households are,53 or (3) higher-income households are more likely to
have access to a workplace DC plan, thus having the ability to set up rollover IRAs when they
switch jobs.54

51 CRS analysis of the 2019 SCF. IRA-owning households are households where the head of household or spouse, if
applicable, indicated owning a traditional, Roth, or rollover IRA. Any additional individual(s) in the household with an
IRA is not included in this analysis. Analysis does not include households with Keogh accounts or employer -sponsored
IRAs. In the SCF dataset, there were seven observations where an individual other than the head of household or
spouse had an IRA but the head of household or spouse did not. T here were 24 observations where the head of
household or spouse, and an additional individual in the household, had an IRA. Estimates using data by ICI indicated
that 36% of U.S. households—or 46.6 million households—owned an IRA in mid-2019 (though its measure included
employer-sponsored IRAs, which are not covered in this report). See ICI, Frequently Asked Questions About Individual
Retirem ent Accounts (IRAs), December 2019, https://www.ici.org/faqs/faq/Individual-Retirement -Accounts-(IRAs)-
FAQs/ci.faqs_iras.print .
52 See IRS, Statistics of Income Tax Stats: Accumulation and Distribution of Individual Retirement Arrangements,
T ables 5 and 6, at https://www.irs.gov/statistics/soi-tax-stats-accumulation-and-distribution-of-individual-retirement-
arrangements.
53 T he SCF asked respondents about their primary reason for saving. Among households with income greater than or
equal to $75,000 in 2018 (updated to 2019 dollars), 41.3% of households indicated that their primary reason was for
retirement. Among households with income less than $75,000 in 2018 (updated to 2019 dollars), 18.5% indicated that
their primary reason to save was for retirement. Similar trends occurred based on education level of the head of
household: Retirement was the primary purpose for saving for 35.3% of households whose head of household had at
least a bachelor’s degree, compared to 23.1% of those whose head of household had less than a bachelor’s degree.
54 In March 2019, 73% of civilian workers in the highest 25% of the wage distribution had access to a DC plan,
compared to 42% of workers in the lowest 25%. See Bureau of Labor Statistics, National Com pensation Survey:
Em ployee Benefits in the United States, March 2019, T able 2: Retirement benefits: Access, participation, and take-up
rates, civilian workers, https://www.bls.gov/ncs/ebs/benefits/2019/employee-benefits-in-the-united-states-march-
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Ownership also increased with age, likely due to rollovers from employer-sponsored plans
following job separation or retirement or because of an increased focus on retirement saving.
Married households were more likely to own IRAs than were single households.
IRA ownership rates also varied across households based on the reported race or ethnicity of the
household respondent.55 The following percentages of households owned IRAs: 31.8% of those
with a White, non-Hispanic household respondent; 27.5% of those with a respondent identifying
as “other” (e.g., Asian, American Indian/Alaska Native, Native Hawai an/Pacific Islander, or
other); 8.7% of those with a Black household respondent; and 7.8% of those with a Hispanic
household respondent.56
Among household categories based on race or ethnicity, households with respondents who
identified as “Other” had the highest median IRA balance at $100,000, while White, non-
Hispanic households had the highest average IRA balance at $271,358.
Table 5. IRA Ownership and Account Balances by Household Characteristic in 2019
Percentage of
U.S.
Households
Median Account
Average Account

with Account
Balance
Balance
Al Households
25.3%
$70,000
$253,799

Age of the Head of Household:

Younger than 35
12.0%
$7,000
$22,529
35-44
21.8%
$53,000
$99,142
45-54
28.0%
$62,000
$174,390
55-64
30.1%
$100,000
$316,139
65 and older
32.8%
$125,000
$387,790

2018 Household Income (in 2019
dol ars):

Less than $30,000
6.7%
$23,200
$95,306
$30,000-$49,999
14.5%
$35,000
$88, 442
$50,000-$74,999
21.8%
$36,000
$108,606
$75,000-$124,999
32.1%
$54,000
$182,863
$125,000 or more
54.0%
$143,000
$406,569

Household Marital Status:

2019.pdf.
55 T he SCF’s question about race or ethnicity is asked only of the designated respondent. In 79% of sampled
households, the designated respondent was the head of household.
56 “Other” includes respondents who indicated that they identified as Asian, American Indian/Alaska Native, Native
Hawaiian/Pacific Islander, or other. T he SCF combined these categories in the public dataset. T he SCF allows
respondents to indicate more than one race or ethnicity . CRS used the first response to analyze data. Nearly 6% of
respondents indicated more than one race or ethnicity (translating to an estimated 6.4% of the U.S. population).
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Percentage of
U.S.
Households
Median Account
Average Account

with Account
Balance
Balance
Married
32.3%
$84,000
$293,737
Single
16.4%
$47,000
$153,721
Single female
16.5%
$44,300
$137,488
Single male
16.3%
$50,000
$177,780

Race or Ethnicity of the Household

Respondenta:
White, non-Hispanic
31.8%
$74,000
$271,358
Otherb
27.5%
$100,000
$233,329
Black/African-American
8.7%
$40,000
$99,828
Hispanic
7.8%
$20,000
$90,227

Education Level of the Head of
Household:

Less than high school
6.1%
$25,000
$64,465
High school graduate
15.5%
$49,000
$128,207
Some col ege
16.7%
$50,000
$137,535
Associate’s degree
21.8%
$42,900
$138,279
Bachelor’s degree
37.6%
$84,000
$292,524
Advanced degree (master’s,
professional, doctorate)
49.7%
$120,000
$374,562
Source: CRS analysis of the 2019 Survey of Consumer Finances (SCF).
Note: Median and average account balances are calculated using the aggregated value of al IRAs among IRA-
owning households in 2019. IRA-owning households are households where the head of household or spouse, if
applicable, indicates owning an IRA. Any additional individual(s) in the household with an IRA is not included in
this analysis. Analysis does not include households with Keogh accounts or employer-sponsored IRAs.
a. The SCF’s question about race or ethnicity is asked only of the designated respondent. In 79% of sampled
households, the designated respondent was the head of household.
b. “Other” includes respondents who indicated that they identified as Asian, American Indian/Alaska Native,
Native Hawai an/Pacific Islander, or other. The SCF combined these categories in the public dataset. The
SCF al ows respondents to indicate more than one race or ethnicity. CRS used the first response to analyze
data. Nearly 7% of households had a respondent who indicated more than one race or ethnicity.
IRA Ownership by IRA Type
Table 6 provides data on the percentage of households with IRAs in 2019 that owned traditional,
Roth, or rollover IRAs, organized by age group.57 Households may own multiple types of IRAs.
Several observations can be made from Table 6, specifical y:

57 T he SCF does not provide details on whether rollover IRAs are traditional or Roth or whether a household owns an
inherited IRA.
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 12% of households headed by someone younger than 35 own IRAs. Roth IRAs
are more common than traditional IRAs for these households.
 32.8% of households headed by someone aged 65 or older own IRAs. Traditional
and rollover IRAs are more common than Roth IRAs for these households.58
Rollover IRA ownership rates general y increase with age as individuals change jobs or retire.
IRA-owning households aged 55 and older have higher traditional IRA ownership rates (52.9%)
than Roth IRA ownership rates (35.8%). One possible reason for this difference is that because
Roth IRAs were first authorized in 1997, older households may have spent some of their working
years with access to only traditional IRAs (e.g., an individual who was 55 years old in 2019 was
33 years old when Roth IRAs were introduced). Some of these individuals, in their peak earning
years, may not have been eligible to contribute to Roth IRAs due to the income eligibility limits.
Table 6. IRA Ownership by IRA Type in 2019
Data in parentheses represents ownership rates among al households in each age group

For Households with IRAs (or for All Households)
Age of the Head of
Has a Traditional
Has a Roth
Has a Rollover
the Household
Has an IRA
IRA
IRA
IRA
Younger than 35
12.0%
30.0% (3.6%)
67.8% (8.1%)
n/a (n/a)a
35-44
21.8%
34.4% (7.5%)
66.5% (14.5%)
33.0% (7.2%)
45-54
28.0%
41.5% (11.6%)
53.6% (15.0%)
37.8% (10.6%)
55-64
30.1%
43.7% (13.2%)
41.1% (12.4%)
48.3% (14.5%)
65 and older
32.8%
57.6% (18.9%)
32.4% (10.6%)
40.7% (13.4%)
Source: CRS Analysis of the 2019 Survey of Consumer Finances (SCF).
Notes: The SCF does not provide detail on whether rol over or inherited IRAs are traditional or Roth.
Percentages wil not sum to 100% because some households have more than one type of IRAs. IRA-owning
households are households where the head or household or spouse, if applicable, indicates owning an IRA. Any
additional individual(s) in the household with an IRA is not included in this analysis. Analysis does not include
households with Keogh accounts or employer-sponsored IRAs.
a. Sample size was too smal for analysis.
Characteristics of Households Based on IRA Ownership
In 2019, IRA-owning households were general y older, wealthier, and more likely to be married
(or living with a partner) than were non-IRA-owning households. Median net worth of
households with an IRA was over nine times higher than that of households without an IRA—

58 Note that households in this age group may have retired and withdrawn all IRA assets or converted assets into
annuities, or households in this group may still be working and plan to roll assets into an IRA later.
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$585,100 compared to $64,730.59 Households with an IRA had more than twice the median
income of households without an IRA in 2018.60
Table 7 further details characteristics of households based on IRA ownership. Compared to
households without an IRA, households with an IRA were:
 more likely to have at least a bachelor’s degree (61.3% compared to 27.9%) and
 more likely to own their principal residence (86.4% compared to 57.6%).61
Table 7. Characteristics of Households Based on IRA Ownership in 2019
IRA-Owning
Non-IRA-Owning

Households
Households
Estimated Number of Households
32.5 mil ion
96.1 mil ion

Demographic Characteristics

Average age of head of household
56.6
50.1
Head of household has at least a bachelor’s degree
61.3%
27.9%
Percentage married or living with partner
71.5%
50.8%

Financial Characteristics

Median net worth
$585,100
$64,730
Average net worth
$1,986,931
$326,913
Median income (in 2018, updated to 2019 dol ars)
$107,921
$47,852
Average income (in 2018, updated to 2019 dol ars)
$203,583
$73,294
Ownership rate of principal residencea
86.4%
57.6%

Retirement Plan Participation

Has any type of pension (DB or DC) from current
72.1%
52.2%
or past job
Has a DB pension from current or past job
40.3%
26.7%
Has a DC account from current job if head of
52.0%
32.8%
household or spouse is in the labor force

Account-Type Retirement Savings (includes IRAs, account-type

pensions at current job, future account-type pensions to be
received, and currently received benefits)
Has savings
100.0%
33.6%

59 Based on SCF estimates, the median household net worth was $121,760 in 2019. T his estimate does not include
wealth in DB pension plans. When the Federal Reserve accounted for DB wealth, median household net worth was
nearly $172,000. See Federal Reserve, Wealth and Incom e Concentration in the SCF: 1989 -2019, September 28, 2020,
https://www.federalreserve.gov/econres/notes/feds-notes/wealth-and-income-concentration-in-the-scf-20200928.htm.
60 Income is recorded for the year prior to the survey (2018) but updated to 2019 dollars.
61 Ownership of principal residence is defined as the household owning a ranch/farm/mobile home/house/condo/co-
op/etc. Ownership does not indicate whether or not the residence is fully paid off.
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IRA-Owning
Non-IRA-Owning

Households
Households
Median account balance if household has savings
$144,000
$32,000
Average account balance if household has savings
$396,698
$111,304

Account-Type Retirement Savings (not including IRAs)

Has savings
48.9%
see above
Median account balance if household has savings
$111,840
see above
Average account balance if household has savings
$292,202
see above
Source: CRS Analysis of the 2019 Survey of Consumer Finances (SCF).
Notes: The SCF does not provide data on the value of defined benefit pensions that a household expects to
receive in retirement. IRA-owning households are households where the head or household or spouse, if
applicable, indicates owning an IRA. Any additional individual(s) in the household with an IRA is not included in
this analysis. Analysis does not include households with Keogh accounts or employer-sponsored IRAs. Account-
type retirement savings include DC plans, such as a 401(k) or 403(b) or an IRA, in which funds are accumulated
in an individual’s account.
a. Ownership of principal residence is defined as the household owning a ranch/farm/mobile
home/house/condo/co-op/etc.
IRAs were original y established so that individuals (1) without access to an employer-sponsored
plan could save for retirement and (2) with savings from employer-sponsored plans could roll
over savings into similarly tax-advantaged accounts.
Fifteen percent of households in the labor force without employer-sponsored pensions indicated
owning an IRA in 2019.62 A household without a pension might have an IRA for two separate
(though not mutual y exclusive) reasons: (1) to save for retirement or (2) because it rolled over
savings from a past DC plan or other IRA.63
Though 15% of households without employer-sponsored pensions indicated owning an IRA,
ownership rates varied based on household income. Among households in the labor force without
pensions, the following percentages had an IRA in 2019:
 5.2% of those with income under $30,000;
 10.6% of those with income from $30,000 through $49,999;
 18.7% of those with income from $50,000 through $74,999;
 28.5% of those with income from $75,000 through $124,999; and
 56.2% of those with income $125,000 or higher.64
Households in the labor force without pensions that use IRAs to save for retirement are more
likely to contribute in a given year than are households that have IRAs due to rollovers. Among

62 Households in the labor force is defined as households in which the head of household or spouse is in the labor force,
meaning that the individual responded that he or she was working in any capacity, temporarily laid off and e xpecting or
not expecting to return to work, on sick/maternity leave, on sabbatical, unemployed and looking for work, an unpaid
volunteer, or an unpaid family worker (e.g., work for a family business without pay). Employer -sponsored pensions
include DB and DC plans.
63 In addition, a household could inherit an IRA.
64 Income refers to household income and is reported for 2018 but updated to 2019 dollars.
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IRA-owning households in the labor force without pensions, 35.9% made an IRA contribution in
2018.65 The median contribution was $4,000; the average was $4,862.66
Another reason why households in the labor force without pensions might have IRAs is due to
rollovers from previous job retirement accounts. Among these households, 44.4% indicated that
they had received payouts or rollovers from previous employer-sponsored pensions that they had
subsequently rolled to IRAs (or annuities).67 Among households that had received payouts or
rolled over savings to IRAs (or annuities), 22.9% indicated that they had made IRA contributions
in the previous year.
Figure 3 provides a visual representation of the relationship between employer-sponsored
retirement plans and IRA ownership rates. Figure 3 shows, by age group, the percentage of
households with an IRA balance, DC balance, or DB pension plan in 2019. The percentage of
households with DB pensions increases with the age of the head of household. This likely reflects
the shift in the private sector from DB to DC plans over the past four decades.68 The percentage
of households with DC account balances decreases as the percentage with IRA balances increases
starting around the 45-54 age group, likely reflecting the increasing incidence of rollovers
following job transitions or retirement. It could also reflect that older households may be less
likely than younger households to have or have had a DC plan and, thus, may be more likely to
contribute to an IRA.

65 T he percentage of households who make IRA contributions is likely skewed toward higher -income households.
Sample sizes for households in the lower end of the income distribution who contributed to their IRA wer e not large
enough to analyze.
66 In 2018, IRA contribution limits were $5,500 ($6,500 for individuals aged 50 and older). Contribution limits apply to
individual account holders: T wo earners in one household could contribute $5,500 (or $6,500) each.
67 T he SCF does not separate rollovers into annuities from rollovers into IRAs.
68 In 1975, the year after ERISA was enacted, private sector DB plans had a total of 27.2 million active participants,
and private sector DC plans had 11.2 million active participants. In 2017, the most recent year for which there is data,
private sector DB plans had 13.5 active participants, and private sector DC plans had 81.2 active participants. See
Employee Benefits Security Administration, Private Pension Plan Bulletin Historical Tables and Graphs: 1975 -2017,
September 2019, T able E.7, https://www.dol.gov/sites/dolgov/files/EBSA/researchers/statistics/retirement -
bulletins/private-pension-plan-bulletin-historical-tables-and-graphs.pdf.
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Individual Retirement Account (IRA) Ownership: Data and Policy Issues

Figure 3. Percentage of Households in 2019 with an IRA Balance, Defined
Contribution (DC) Account Balance, or a Defined Benefit (DB) Pension

Source: CRS analysis of the 2019 Survey of Consumer Finances.
Notes: IRA-owning households are households where the head or household or spouse, if applicable, indicates
owning an IRA. Any additional individual(s) in the household with an IRA is not included in this analysis. Analysis
does not include households with Keogh accounts. DC account balances are calculated as the sum of non -IRA
account-type pension balances for the head of household and spouse, if applicable.
About 75% of U.S. households do not own IRAs. Not al households may be interested in IRA
ownership: Some may not have sufficient income to dedicate to an IRA; other households may
have employer-sponsored pension savings or other private savings or plan to roll over employer
plan savings to IRAs later in their careers.69 Among households without IRAs, almost half
(47.8%) did not have DB or DC pensions from current or past jobs (Table 7). Nearly 34% of
households without an IRA indicated that they had savings elsewhere in account-type retirement
plans, such as a 401(k) plans. Over one-fourth (26.7%) of non-IRA-owning households had DB
pensions from current or past jobs.
Other households might intend to rely on Social Security or other savings (e.g., housing equity,
annuities) for income in retirement. Though estimates of how Social Security benefits compare to
a household’s pre-retirement income vary, some researchers found that Social Security provided
benefits equal to 90% of pre-retirement income for a retiree who earned a poverty-level wage
while working.70 The percentage of Social Security beneficiaries who receive at least 90% of their
income in retirement from Social Security ranges—some researchers have estimated it at 18%,
while others have estimated it at nearly 25%.71

69 In March 2019, 71% of civilian workers had access to an employer-sponsored retirement plan, and 56% participated.
See Bureau of Labor Statistics, National Com pensation Survey: Em ployee Benefits in the United States, March 2019,
T able 2.
70 See Andrew Biggs, How Hard Should We Push the Poor to Save for Retirement, American Enterprise Institute, 2019,
https://www.aei.org/wp-content/uploads/2019/05/Biggs-JOR-How-Hard-Should-We-Push-the-Poor-to-Save.pdf.
71 See Adam Bee and Joshua Mitchell, “Do Older Americans Have More Income T han We T hink?,” U.S. Census
Bureau, SESHD Working Paper no. 2017 -39, July 2017, https://www.census.gov/content/dam/Census/library/working-
papers/2017/demo/SEHSD-WP2017-39.pdf; and Irina Dushi, Howard Iams, and Brad T renkamp, “The Importance of
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IRAs and Perceived Retirement Income Adequacy
Because IRAs are just one component within a household’s possible retirement income sources, it
is difficult to determine the extent to which IRA ownership is associated with adequate retirement
income.72 The SCF includes a question asking respondents to rate their perceived satisfaction of
their current retirement income (or the income they expect to receive, if not yet retired) on a scale
ranging from “total y inadequate” to “very satisfactory.” In 2019, a higher percentage of
households with IRAs rated their perceived retirement income as “enough to maintain living
standards” or better compared to households without IRAs (85.3% compared to 63.2%).73 This
may be because IRA-owning households tend to have higher income and net worth levels—and
are more likely to have workplace pension coverage—than households without IRAs, which may
translate into greater retirement security. However, IRA ownership does not guarantee retirement
income adequacy. Other factors likely influence retirement preparedness.
For example, perceived retirement income adequacy also varies by net worth regardless of IRA
ownership. Non-IRA-owning households in the top two quintiles based on net worth had higher
perceived retirement income adequacy than did IRA-owning households in the bottom three net
worth quintiles (Table 8).
Table 8. Perceived Retirement Income Adequacy Based on Net Worth and IRA
Ownership
Percentage of households that rate their perceived retirement income as “adequate to maintain living
standards” or higher in 2019
Net Worth Quintile
IRA-Owning Households
Non-IRA-Owning Households
1st
64.1%
49.1%
2nd
62.7%
59.0%
3rd
70.5%
67.5%
4th
84.2%
74.4%
5th
93.0%
81.9%
Source: CRS Analysis of the 2019 Survey of Consumer Finances (SCF).
Notes: The SCF includes a question asking respondents to rate their perceived satisfaction of their current
retirement income (or the income they expect to receive, if not yet retired) on a scale ranging from “total y
inadequate” to “very satisfactory.” IRA-owning households are households where the head or household or
spouse, if applicable, indicates owning an IRA. Any additional individual(s) in the household with an IRA is not
included in this analysis. Analysis does not include households with Keogh accounts. The 1 st net worth quintile
represents the lowest quintile of net worth; the 5th indicates the highest.
Increasing IRA Ownership: Policy Options and Considerations
Policy options aimed at increasing IRA ownership depend on the broader policy goal, such as
increasing IRA ownership across al households, lower-income households, or households
without access to employer-sponsored plans.

Social Security Benefits to the Income of th e Aged Population,” Social Security Bulletin Vol. 77 No. 2 (2017),
https://www.ssa.gov/policy/docs/ssb/v77n2/v77n2p1.html.
72 In addition, retirement income adequacy is difficult to define and varies by household.
73 Note that perceived retirement income adequacy may differ from retirement income adequacy in practice.
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Previous federal and state efforts have aimed to increase IRA ownership. In January 2014,
President Obama issued a presidential memorandum that directed Treasury to create the MyRA
program. Treasury issued final regulations in December 2014. The MyRA program sought to
expand retirement savings options to workers without savings and low -dollar savers by al owing
employers to set up payroll deduction Roth IRAs for their employees. In a payroll deduction IRA,
amounts are deducted from an employee’s paycheck and are deposited into the employee’s own
IRA account. Employers could, but were not required to, offer myRA accounts to their
employees.74 Treasury ended the MyRA program on September 17, 2018, citing cost-
ineffectiveness as reason for the termination.75 The program had around 30,000 participants with
aggregate savings of $34 mil ion.76
Several states have enacted or implemented state-facilitated retirement savings programs to
increase plan access and savings among private sector workers whose employers do not offer
workplace retirement savings plans. As of September 2020, the most common state-facilitated
effort is the payroll deduction IRA. When payroll deduction IRAs include an automatic
enrollment feature (in which employees are automatical y enrolled but can explicitly opt out),
these plans are sometimes referred to as automatic (or auto) IRAs. Whether federal pension law
applies to state-facilitated IRAs is an ongoing issue.77
Academic literature provides various recommendations to increase IRA ownership. A study of
one state-administered automatic IRA program, OregonSaves, observes that reducing search costs
(such as providing a default contribution rate during automatic enrollment) may lead to higher
retirement plan participation than in the absence of a plan.78
Another study found that automatic enrollment features are associated with higher workplace plan
participation.79 If workplace plan participation is associated with subsequent IRA ownership (due
to rollovers), automatic enrollment features or other policy tools that increase workplace plan
participation might increase IRA ownership. However, stakeholders and policymakers have raised
concerns about rollover information given to participants.80 Multiple factors are involved in the
decision to roll over funds from a 401(k) to an IRA versus keeping funds in a 401(k). These

74 T here were no fees associated with myRA accounts. Account owners could transfer their account balances to private
sector IRA providers at any time, but account owners who (1) reached the maximum balance ($15,000) or (2) had the
account s for 30 years had to transfer their account s to private sector Roth IRAs.
75 See U.S. Department of the Treasury, “ Treasury Announces Steps t o Wind Down myRA Program,” press release,
July 28, 2017, https://www.treasury.gov/press-center/press-releases/Pages/sm0135.aspx.
76 See letter from Senator Orrin Hatch to Secretary of the T reasury Steven Mnuchin, August 1, 2017,
https://www.finance.senate.gov/imo/media/doc/8.1.2017%20myIRA%20Letter.pdf.
77 For more information, see CRS In Focus IF11611, State-Administered IRA Programs: Overview and Considerations
for Congress.
78 See John Chalmers et al., “Auto-Enrollment Retirement Plans for the People: Choices and Outcomes in
OregonSaves,” Pension Research Council Working Paper, July 2020,
https://repository.upenn.edu/cgi/viewcontent.cgi?article=168 6&context=prc_papers.
79 See Brigitte Madrian and Dennis Shea, “T he Power of Suggestion: Inertia in 401(k) Participation and Savings
Behavior,” Quarterly Journal of Economics, vol. 116, no. 4 (2001), https://www.nber.org/papers/w7682.pdf.
80 See U.S. Senate Committee on Banking, Housing, and Urban Affairs, “ Brown, Colleagues Demand T rump
Administration Rescind Proposals Leaving Workers’ Retirement Savings at Risk ,” August 7, 2020,
https://www.banking.senate.gov/newsroom/minority/brown -colleagues-demand-trump-administration-rescind-
proposals-leaving-workers-retirement-savings-at-risk. In the letter, Members of Congress express concern that rollover
advice under the Department of Labor’s (DOL’s) proposed rule might not be made in the participant’s best interest.
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include fee differences, the number of investment options, penalty-free withdrawal opportunities,
and fiduciary protections, among others.81
Clarify Treatment of State-Administered Retirement Savings Programs
In August 2016, the U.S. Department of Labor (DOL) issued a safe harbor regulation that
established criteria for designing state-administered payroll deduction IRAs “to reduce the risk of
ERISA preemption.”82 In December 2016, DOL issued another rule that expanded the
applicability of the safe harbor to qualified state political subdivisions, which applied to cities that
established payroll deduction IRA programs. In April 2017 and May 2017, Congress used the
procedures in the Congressional Review Act (CRA, enacted as part of the Smal Business
Regulatory Enforcement Fairness Act of 1996; P.L. 104-121) to nullify DOL’s regulations
creating safe harbors for savings arrangements established by qualified state political subdivisions
and by states (P.L. 115-24 and P.L. 115-35, respectively).
Following Congress’s actions under the CRA, the issue of ERISA preemption remains uncertain.
Despite this uncertainty, some states have indicated that they are continuing with implementation
of their programs. Congressional action could resolve the uncertainty legislatively.
For more information on these programs, see CRS In Focus IF11611, State-Administered IRA
Programs: Overview and Considerations for Congress.
Authorize Automatic IRAs at the Federal Level
Several bil s have been introduced that would create automatic IRAs at the federal level, similar
to the efforts under the MyRA program and state-facilitated savings programs.83 Advocates of
automatic IRA efforts cite that the coverage gap between workers with and without pension
coverage wil decrease and that increased savings wil reduce the burden on future social
assistance programs.84 In addition, some researchers found that automatic IRAs implemented
early on in individuals’ careers could increase retirement income for between two-thirds and one-
half of individuals in the lowest quarter of the income distribution at age 70.85
Others caution that automatical y enrolling lower-income individuals into savings plans may have
unintended consequences. For example, increased savings could result in decreased standards of
living during working years and could result in disqualification from means-tested governments

81 See U.S. Government Accountability Office (GAO), 401(k) Plans: Labor and IRS Could Improve the Rollover
Process for Participants, GAO-13-30, March 2013, https://www.gao.gov/assets/660/652881.pdf; and DOL, Im proving
Investm ent Advice for Workers and Retirees, https://www.dol.gov/agencies/ebsa/about -ebsa/our-activities/resource-
center/fact -sheets/improving-investment-advice-for-workers-and-retirees. In situations where individuals or
organizations provide advice that meets the five-part test to be considered investment advice under ERISA, they must
follow fiduciary standards. Whether rollover advice is considered investment advice varies on a case-by-case basis. For
example, an individual who provides advice that is not made on a “regular basis” might fail the test and, thus, not be
subject to fiduciary standards.
82 29 C.F.R. §2510.3-2(h) (2016). Preemption refers to federal law superseding conflicting state laws. For more
information, see CRS Report R45825, Federal Preem ption: A Legal Prim er.
83 See, for example, H.R. 3499 in the 115th Congress and S. 2370 in the 116th Congress.
84 See Representative Richard Neal, press release, August 10, 2020, https://neal.house.gov/media-center/press-
releases/rep-neal-introduces-automatic-ira-bill.
85 See Barbara Butrica and Richard Johnson, How Much Might Automatic IRAs Improve Retirement Security for Low-
and Moderate-Wage Workers?, Urban Institute, July 2011,
https://www.urban.org/sites/default/files/publication/27386/412360 -How-Much-Might -Automatic-IRAs-Improve-
Retirement -Security-for-Low-and-Moderate-Wage-Workers-.PDF.
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programs (e.g., losing Medicaid eligibility due to mandatory withdrawals in retirement).86 One
study found that automatic enrollment in retirement accounts may cause increases in auto loans
and first lien mortgage balances.87 Another found that automatic enrollment may not necessarily
have large impacts on household net worth over time.88
Some point out that individuals with lower income may not need to save through IRAs to the
same degree as individuals with higher income to maintain their pre-retirement standard of living
because of Social Security’s progressive benefit formula.89
If federal automatic IRAs were created, there might be some questions about overlap with
existing state-administered programs. In 2012, researchers estimated that 24 mil ion to 43 mil ion
workers would be eligible to participate in a federal automatic IRA program.90
Eliminate the Roth IRA Income Threshold
Eliminating the income threshold to contribute to Roth IRAs might increase the number of
individuals who contribute to Roth IRAs and, therefore, increase IRA ownership.91 In 2017,
taxpayers who were married filing jointly were ineligible to contribute to Roth IRAs if they had
adjusted gross income (AGI) of $196,000 or higher. In that year, 13% of taxpayers with AGIs
from $100,000 to $200,000 contributed to Roth IRAs.92 The benefits of repealing the income
threshold would accrue mainly to high-income households.

86 See Andrew G. Biggs, “Stop Pushing Poor People to Save More for Retirement ,” MarketWatch, September 12, 2019,
https://www.marketwatch.com/story/stop-pushing-poor-people-to-save-more-for-retirement-2019-09-12.
87 T his study found that when the U.S. Army moved to automatic enrollment in the T SP at a 3% default contribution
rate, both the number of employees contributing and the average contribution rate increased, but the move also
significantly increased auto loan and mortgage balances. See John Beshears et al., Borrowing to Save? The Im pact of
Autom atic Enrollm ent on Debt, NBER Working Paper no. 25876, May 2019.
88 Using data from 34 U.S. 401(k) plans, this study estimated that, on average, although automatic enrollment into
401(k) plans increases savings in the plan in the short run, employees tend to respond by saving less in the future , so
the long-term impact of automatic enrollment on retirement savings is not significant on average and is significant only
for the lowest lifetime earnings groups. See T aha Choukhmane, “Default Options and Retirement Saving Dynamics,”
June 10, 2019, https://cepr.org/sites/default/files/Choukhmane%20%282019%29%20 -%20Default%20Options.pdf.
89 T he Social Security benefit formula is progressive. T hat is, the formula is weighted to replace a larger share of the
pre-retirement earnings of low-wage workers compared with those of higher-wage workers. See Andrew G. Biggs,
How Much Should the Poor Save for Retirem ent? Data and Sim ulations on Retirem ent Income Adequacy Among Low -
Earning Households, ScholarlyCom m ons, 2019, https://repository.upenn.edu/prc_papers/537.
90 See Benjamin Harris and Ilana Fischer, The Population of Workers Covered by the Auto IRA: Trends and
Characteristics, AARP Public Policy Institute, February 2012,
https://www.aarp.org/content/dam/aarp/research/public_policy_institute/econ_sec/2012/Population-of-Workers-Auto-
IRA-T rends-and-Characteristics-Research-Report-AARP-ppi-econ-sec.pdf.
91 An individual above the income threshold to contribute to a Roth IRA might still own a Roth IRA for several
reasons. T his individual could have inherited one, contributed to one in the past, or converted savings from a traditional
IRA to a Roth IRA.
92 CRS analysis of IRS, Statistics of Income 2017 Tax Stats—Accumulation and Distribution of Individual Retirement
Arrangem ents (IRA), T able 3, https://www.irs.gov/statistics/soi-tax-stats-accumulation-and-distribution-of-individual-
retirement -arrangements. In 2017, single filers with an AGI of $133,000 or more were ineligible to make Roth IRA
contributions.
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Contribution Amount and Savings Accumulation
Two main factors influence savings accumulation in an IRA: inflows (from contributions and
rollovers) and investment earnings.93 Most inflows to traditional IRAs are from rollovers. In 2017
(the most recent year for which data are available), 96.1% of the inflows to traditional IRAs by
dollar amount were from rollovers ($463 bil ion from rollovers compared to $18.8 bil ion from
contributions).94 In contrast, most inflows to Roth IRAs come from contributions rather than
rollovers or conversions. In 2017, 70.4% of Roth IRA inflows were from contributions ($23.5
bil ion compared to $9.9 bil ion from rollovers and $10.0 bil ion from conversions).95
Investment choices also affect the value of an individual’s IRA. As individuals are general y
responsible for choosing their investment portfolio, adjustment of investment al ocations over
time (referred to as portfolio rebalancing) may play a role in savings accumulation.
Some stakeholders believe that many households’ retirement savings are inadequate to maintain
pre-retirement standards of living.96 In 2019, the median IRA account balance was $70,000
(Table 5). If a household had no other resources to fund retirement expenses, a $70,000 balance
at age 65 would provide a monthly lifetime benefit of about $300 (less if the IRA owner chooses
a joint-and-survivor annuity).97 The average IRA balance—$201,062—would provide a monthly
lifetime benefit of around $850 (less for a joint-and-survivor annuity).98 Though it is likely that
most IRA owners also receive Social Security benefits, stakeholders have showed interest in
policy options that would increase savings in IRAs. These options general y focus on
contributions rather than investment al ocations. The following sections provide data on both.
Most recently, the SECURE Act sought to increase IRA savings by eliminating the age restriction
to contribute to traditional IRAs and permitting stipend and fel owship payments for students
pursuing higher education to be considered wage income for the purposes of IRA contributions.
Data on IRA Contributions
Contributions to IRAs may come only from taxable compensation (e.g., wages, salaries,
commissions, self-employment income, and taxable fel owship and stipend payments used in the
pursuit of graduate or postdoctoral studies).99 Prior to 2020, individuals were not al owed to make

93 Other factors—such as withdrawals, penalties, and the tax rates on withdrawals—can also affect an IRA’s value.
94 CRS analysis of data in ICI, The US Retirement Market, Fourth Quarter 2019, T able 11.
95 Some stakeholders believe that the ability to convert traditional IRA assets to Roth IRA assets (sometimes referred to
as a “backdoor” Roth IRA) should be eliminat ed because it benefits high-income taxpayers who are ineligible to
contribute to Roth IRAs. For example, in the 114 th Congress, Senator Ron Wyden released a discussion draft that
included a provision that would have eliminated Roth conversions. See U.S. Senate Committee on Finance, “ Wyden
Proposal Would Crack Down on T ax Avoidance in Retirement Plans, Create New Opportunities for Working
Americans to Save,” press release, September 8, 2016, https://www.finance.senate.gov/ranking-members-news/wyden-
proposal-would-crack-down-on-tax-avoidance-in-retirement-plans-create-new-opportunities-for-working-americans-to-
save.
96 See Jennifer Erin Brown, Joelle Saad-Lessler, and Diane Oakley, Retirement in America: Out of Reach for Working
Am ericans?, National Institute on Retirement Security, September 2018, https://www.nirsonline.org/wp-
content/uploads/2018/09/SavingsCrisis_Final.pdf.
97 See DOL, Lifetime Income Calculator, https://www.dol.gov/agencies/ebsa/laws-and-regulations/rules-and-
regulations/advanced-notices-of-proposed-rulemaking/lifetime-income-calculator.
98 DOL, Lifetime Income Calculator.
99 T he SECURE Act permitted taxable fellowship and stipend payments to be treated as compensation for the purposes
of IRA contributions.
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contributions to traditional IRAs past age 70½. The SECURE Act eliminated this age restriction.
Contributions to Roth IRAs are al owed at any age provided that the individual has taxable
compensation.
The Internal Revenue Code sets annual limits on contributions to traditional and Roth IRAs.100 In
2020, the contribution limit is $6,000. Individuals aged 50 or older may contribute an additional
$1,000, referred to as a catch-up contribution. Contribution limits are adjusted for inflation, but
catch-up contribution limits are not. The contribution limit applies to al of an individual’s
IRAs—an individual with both a traditional and Roth IRA may not have aggregate contributions
that exceed the limit.
Contributions to traditional IRAs can be made regardless of the individual’s income. Contribution
eligibility for Roth IRAs is phased out for taxpayers with earnings above specified thresholds. For
example, in 2020, individuals filing single or married filing separately with a modified AGI of
$139,000 or more are ineligible to contribute to Roth IRAs. Those who are married filing jointly
with a modified AGI of $206,000 or more are ineligible to contribute (Table B-1).
Traditional IRA contributions may be deductible for individuals who do not have employer-
sponsored pension coverage or for those whose earned income fal s below certain thresholds
(Appendix A). Contributions to Roth IRAs are not deductible. However, because Roth IRA
contributions are not deductible, the effective contribution limit for Roth IRAs is higher relative
to traditional IRAs.101
Table 9 describes taxpayer contributions to traditional and Roth IRAs in 2017 (the most recent
year for which data are available), respectively. Over 2 mil ion more taxpayers contributed to
Roth IRAs than to traditional IRAs in 2017.102
Among taxpayers who contributed to traditional IRAs in 2017:
 half made the maximum contribution for their age group; and
 the average contribution for those who did not contribute the maximum increased
by age group, ranging from about $1,460 for those under age 30 to $2,610 for
those 60 and older.103
More than five times the number of taxpayers under age 30 contributed to Roth IRAs than
traditional IRAs, though roughly the same percentage of each group contributed the maximum
amount permitted. Among taxpayers who contributed to Roth IRAs in 2017:
 over one-third contributed the maximum amount for their age group; and

100 Rollovers, which are transfers of assets from a retirement plan to an IRA (or other retirement plan), and
conversions—redesignations of traditional IRA assets as Roth IRA assets—do not count toward annual contribution
limits.
101 T o illustrate, consider an individual who wants to contribute the maximum $6,000 contribution in a given year. In a
traditional IRA, the individual contributes $6,000, deducting this amount from taxable income (essentially, a “pre -tax”
contribution—the contribution amount and any earnings will be taxed at withdrawal) . If, instead, the individual
contributes $6,000 to a Roth IRA, the contribution is not deductible and is essentially an after -tax contribution—no
further taxation will occur on the contribution, making the $6,000 contribution effectively higher.
102 Note that taxpayers ineligible to deduct traditional IRA contributions may prefer to contribute to Roth IRAs due to
the tax advantages.
103 Note that not all taxpayers are eligible to deduct part or all of their traditional IRA contributions. Deductibility may
factor into a taxpayer’s choice to contribute the maximum amount. In 2017, taxpayers were not permitted to contribute
to traditional IRAs after reaching age 70½.
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 the average contribution for those who did not contribute the maximum increased
by age group, ranging from about $1,790 for those under age 30 to $2,720 for
those 60 and older.104

104 In 2017, the IRA contribution limit for individuals under 50 was $5,500. Individuals aged 50 and over could
contribute an additional $1,000 “catch-up” contribution, or $6,500. T he maximum contribution for Roth IRAs is phased
out for taxpayers approaching the maximum income threshold, which may contribute to the lower percentage of those
contributing the maximum to Roth IRAs as compared to traditional IRAs. In addition, individuals who contribute the
maximum amount permitted but divide their contributions between traditional and Roth IRAs are not captured in the
data as having contributed to the maximum.
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Table 9. Contributions to Traditional and Roth IRAs in 2017

Traditional IRAs
Roth IRAs
Percentage of
Average
Percentage of
Average
Contributing
Contribution of
Contributing
Contribution of
Number of
Taxpayers
Taxpayers Who
Number of
Taxpayers
Taxpayers Who
Age Group
Contributing
Contributing the
Did Not
Contributing
Contributing the
Did Not
Taxpayers
Maximum
Contribute the
Taxpayers
Maximum
Contribute the
Amount ($5,500
Maximum
Amount ($5,500
Maximum
or $6,500)
Amount
or $6,500)
Amount
Under 30
233,115
35.4%
$1,456
1,175,163
34.0%
$1,792
30 under 40
668,913
46.7%
$1,883
1,620,759
31.4%
$1,888
40 under 50
867,146
51.3%
$2,066
1,394,130
26.6%
$2,000
50 under 60
1,399,744
48.8%
$2,499
1,417,525
37.4%
$2,473
60 under 70½
(traditional), 60
1,316,200
54.7%
$2,608
995,486
48.8%
$2,718
under 70 (Roth)
70 or older (Roth)
n/a
n/a
n/a
161,042
56.3%
$2,247
Al age groups
4,485,118
50.0%
$2,279
6,764,105
35.3%
$2,119
Source: CRS Analysis of IRS Statistics of Income 2017 Tax Stats—Accumulation and Distribution of Individual Retirement Arrangements (IRA), Tables 5 and 6.
Notes: In 2017 (the latest year for which data is available), there were 145.8 mil ion taxpayers. In 2017, the IRA contribution limit for individuals under 50 was $5,500.
Individuals aged 50 and older could contribute an additional $1,000 “catch -up” contribution, or $6,500. Prior to 2020, individuals could not contribute to a traditional
IRAs in or after the year in which they turned 70½. Maximum contributions refer only to taxpayers who contribute the exact amount of the limit. The maximum
contribution for taxpayers whose earned income fal s below the contribution limit is lower and is not captured in this table. In addition, the contribution limit applies to
al of an individual’s IRAs, so individuals who contribute the maximum amount but split contributions between tradition al and Roth IRAs wil not be recorded in the data
as having contributed the maximum amount.

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Individual Retirement Account (IRA) Ownership: Data and Policy Issues

Data on IRA Investments
After individuals roll over funds or contribute to an IRA, they can invest savings in multiple
investment options offered by their financial institutions, such as stocks, bonds, and mutual funds.
At the end of 2016, ICI estimated that, among traditional IRA assets held by individuals aged 25
and older, on average:
 64% were invested in equities and equity funds (including the equity portion of
target-date funds),
 17.7% were held in balanced funds (which included equity and non-equity
portions in target date and non-target date funds), and
 16.6% were held in bonds and bond funds.105
In comparison, at the end of 2016, among Roth IRA assets held by individuals aged 18 and older,
on average:
 77.8% were invested in equities and equity funds (including the equity portion of
target-date funds),
 18.9% were held in balanced funds (which included equity and non-equity
portions in target date and non-target date funds), and
 7.1% were held in bonds and bond funds.106
On average, a higher percentage of Roth IRA assets were invested in equities and equity funds
compared to traditional IRAs, and a higher percentage of traditional IRA assets were invested in
bonds compared to Roth IRAs. The Employee Benefit Research Institute estimated that, overal ,
59.8% of Roth IRA assets were held in equities compared to 49.0% of traditional IRA assets in
2016.107
IRAs and Portfolio Rebalancing
Some suggest that investment portfolios should become more conservative—with increasing
al ocations to bonds and decreasing al ocations to equities—as individuals age.108 ICI data
indicated that in 2016, traditional IRA owners aged 30-54 had, on average, more than 70% of
their assets in equities or equity funds (which includes the equity portion of target-date funds)
compared to about 60% for investors aged 65 or older.109 ICI data indicated a similar trend for
Roth IRA investment portfolios.

105 Balanced funds include a mix of stocks and bonds. T arget date funds typically include a mix of stocks and bonds
that generally becomes more conservative as an individual approaches retirement age. Percentages are dollar -weighted
averages. See ICI, The IRA Investor Profile: Traditional IRA Investors’ Activity, 2007 -2016, September 2018, p. 57,
https://www.ici.org/pdf/rpt_18_ira_traditional.pdf.
106 Percentages are dollar-weighted averages. See ICI, The IRA Investor Profile: Roth IRA Investors’ Activity, 2007 -
2016, September 2018, p. 59, https://www.ici.org/pdf/rpt_18_ira_roth_investors.pdf.
107 Estimates were based on t he organization’s own IRA database. See Craig Copeland, EBRI IRA Database: IRA
Balances, Contributions, Rollovers, Withdrawals, and Asset Allocation, 2016 Update , Employee Benefit Research
Institute, August 13, 2018, p. 32, https://www.ebri.org/docs/default -source/ebri-issue-brief/ebri_ib_456_iras-
13aug18.pdf. It appears that the percentage in equities does not include the equity portion of balanced funds.
108 See, for example, Burton Malkiel, A Random Walk down Wall Street: Including a Life-Cycle Guide to Personal
Investing (New York: W. W. Norton and Company, 1999).
109 See ICI, The IRA Investor Profile: Traditional IRA Investors’ Activity, 2007 -2016, p. 57.
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ICI collected data on investment trends among traditional IRA owners that had account balances
at the end of each year from 2007 through 2016 (whom ICI refers to as consistent investors). The
percentage of households aged 70 and older in 2016 that invested 100% of their traditional IRA
assets in equities was lower than that of younger households. Among households aged 27-59 in
2016 and those aged 60-69 in 2016, the percentage that held 100% of their traditional IRA assets
in equities decreased from 2007 to 2016.110
The percentage of consistent Roth IRA investors aged 70 and older in 2016 that invested 100% of
their assets in equities was similar to those aged 60-69.111 Across each age group and within each
year, a higher percentage of Roth IRA investors had 100% of their assets in equities compared to
traditional IRA investors.
It is difficult to know whether the portfolio rebalancing strategy described above is optimal for
IRA-owning households. These households are general y wealthier than non-IRA-owning
households and may be more likely to take risks in their investment portfolios. The SCF asks
households to rate their wil ingness to take financial risks on a scale of zero (not wil ing to take
risks) to 10 (very wil ing to take risks). In 2016, the median value for IRA-owning households
was five, and the median value for non-IRA-owning households was four.
IRA Savings Accumulation: Policy Options and Considerations
Policy options that could increase how much IRA owners save include modifying contribution
limits or deductibility of contributions. Another option that might increase IRA savings is
providing information about future balances to current participants by implementing lifetime
income disclosures.
As previously noted, the effectiveness of tax incentives for retirement savings is not clear. For
example, savings incentives related to IRAs may increase savings in IRAs but coincide with a
decrease in other forms of savings, such as in an employer-sponsored plan (or vice versa), so that
aggregate household savings may not change. Literature is mixed on whether increased
contributions to IRAs represent new savings or a reshuffling of existing assets. Some researchers
found that 9% of IRA contributions represented new national savings, while others found a
smal er effect—specifical y, that increases in the contribution limit between 1983 and 1986
resulted in little to no increase in national saving.112
Modify Saver’s Credit
The Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L. 107-16) established the
Saver’s Credit—a nonrefundable tax credit for individuals under specified income thresholds who
contribute to a retirement account (such as an employer-sponsored DC plan or IRA). The credit
was subsequently made permanent in the Pension Protection Act of 2006 (P.L. 109-280).113

110 See ICI, The IRA Investor Profile: Traditional IRA Investors’ Activity, 2007 -2016, p. 20. Equities include equities,
equity funds, and the equity portion of balanced funds (which include target -date funds).
111 See ICI, The IRA Investor Profile: Roth IRA Investors’ Activity, 2007-2016, p. 26.
112 See Orazio Attanasio and T homas DeLeire, “T he Effect of Individual Retirement Accounts on Household
Consumption and National Saving,” Economic Journal, vol. 112, no. 481 (July 2002); and William Gale and John Karl
Scholz, “IRAs and Household Saving,” American Economic Review, vol. 84, no. 5 (December 1994),
http://www.jstor.org/stable/2117770.
113 T he act also indexed to inflation the credit’s income limits for eligibility.
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Eligible individuals may claim credits equal to 10%, 20%, or 50% of their contributions based on
their income and contributions to IRAs or retirement plans. The maximum credit is $1,000 for
single filers and $2,000 for taxpayers married filing jointly. For example, in 2020, a single filer
with an AGI of $39,000 or less can claim a credit of $1,000 for making a $2,000 contribution.
Appendix D provides information on eligibility for the credit.
In 2018, the average credit claim was $187.114 The credit was claimed by:
 6.0% of al tax returns,
 7.4% of those with an AGI of $10,000 to $25,000 (with an average claim of
$170), and
 15.0% of those with an AGI of $25,000 to $50,000 (with an average claim of
$200).115
Some researchers found that 9.3% of tax returns were eligible to claim the credit in 2016, with
5.03% actual y claiming the credit.116 Under current law, since individuals under certain income
thresholds may not have any tax liability or owe taxes that are less than the full amount of the
credit, the benefit of a nonrefundable credit may be limited.
Legislation has proposed expanding the credit or making the credit refundable.117 Some proposals
would deposit the credit into the individual’s retirement account rather than against their tax
liability, while others would provide a matching amount for individuals who deposited the credit
amounts into their retirement accounts.118 Others would expand the credit and simplify it to a
single rate of 50% (rather than a tiered structure).119
The JCT estimates that the Saver's Credit reduces tax revenue by $1.2 bil ion per year in
FY2020.120 President Obama’s 2011 budget proposed expanding the credit (by making it
available to families with income up $85,000) and making it refundable. The cost estimate was
$29.8 bil ion over FY2011-FY2020.121 For more information on the Saver’s Credit, including a
discussion of its effectiveness in supporting low-income taxpayers, see CRS In Focus IF11159,
The Retirement Savings Contribution Credit.
Modify Contribution Limits
Increasing contribution limits might increase contributions, leading to higher IRA balances for
some individuals. Recent data indicate that half of taxpayers who contribute to traditional IRAs
and over one-third of those who contribute to Roth IRAs contribute the maximum amount
al owed by law (Table 9). If IRA contribution limits were to approach or be equal to DC plan

114 CRS analysis of IRS, Statistics of Income, T able 3.3: All Returns: T ax Liability, T ax Credits, and T ax Payments,
2018, https://www.irs.gov/statistics/soi-tax-stats-individual-statistical-tables-by-size-of-adjusted-gross-income.
115 Ibid.
116 See Jennifer Brown and David John, Improving the Saver’s Credit for Low- and Moderate-Income Workers,
National Institute on Retirement Security, September 2017, https://www.nirsonline.org/wp-
content/uploads/2017/11/final_savers_credit_report_sept_2017.pdf .
117 See, for example, S. 1431 in the 116th Congress.
118 See S. 3781 in the 115th Congress and H.R. 837 in the 113th Congress.
119 See H.R. 8696 in the 116th Congress.
120 See JCT , Estimates of Federal Tax Expenditures for Fiscal Years 2019-2023, p. 29.
121 See Office of Management and Budget, Budget of the U.S. Government, Fiscal Year 2011, p. 160,
https://www.govinfo.gov/content/pkg/BUDGET -2011-BUD/pdf/BUDGET -2011-BUD.pdf.
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contribution limits, it is possible that employers would be less likely to offer workplace savings
plans.122 However, employers likely offer DC plans for other reasons, such as employee recruiting
and retention, and increases in IRA contribution limits may not affect these employers’ employee
benefits.
Targeted contribution limit increases could increase savings for certain households. For example,
contribution limits could be increased for those without access to employer-sponsored plans,
though it is not clear how many IRA-owning households without pension coverage already
contribute the maximum amount.
Some policymakers have proposed increasing the IRA catch-up contribution limit for individuals
over age 50 or indexing it to inflation—under current law, catch-up contributions for DC plans
are adjusted for inflation.123 In tax year 2017, data indicated that 51.6% of individuals aged 50
and older who contributed to traditional IRAs contributed the maximum amount.124 In the same
year, 43.0% of individuals aged 50 and older who contributed to Roth IRAs contributed the
maximum amount.125
Modify Deductibility of Traditional IRA Contributions
Appendix A describes the deductibility of traditional IRA contributions for households with and
without retirement plans at work. For example, a taxpayer of any filing status who does not have
access (and whose spouse, if applicable, does not have access) to a workplace retirement plan
may deduct the full amount of his or her contributions, regardless of income. Single taxpayers
who do have access to workplace plans but have income at or below $65,000 in 2020 may deduct
the full amount of their contributions. Those making $75,000 or more may not deduct any of their
contributions.126 Modifying any of the components of deductibility—including income
thresholds, the amount of the deduction, or the differences in deductibility between households
with and without retirement plan coverage at work—might affect IRA saving behavior.
The Tax Reform Act of 1986 (P.L. 99-514) phased out deductibility for taxpayers who both (1)
had pension coverage and (2) exceeded an income threshold.127 Following these changes,
deductible contributions decreased from $37.8 bil ion in 1986 to $14.1 bil ion in 1987, then to
$11.9 bil ion in 1988 and to $10.8 bil ion in 1989.128
Implement Lifetime Income Disclosures
IRAs and private sector DC plans are subject to federal disclosure requirements, though specific
requirements differ between them. Among other requirements, IRA providers must provide an

122 However, some employers, such as those that do not offer an employer match, may not be influenced by an increase
in the IRA contribution limit.
123 See, for example, S. 1431 and H.R. 8696 in the 116th Congress.
124 CRS analysis of IRS, Statistics of Income 2017 Tax Stats—Accumulation and Distribution of Individual Retirement
Arrangem ents (IRA), T able 5.
125 CRS analysis of IRS, Statistics of Income 2017 Tax Stats—Accumulation and Distribution of Individual Retirement
Arrangem ents (IRA), T able 6.
126 For taxpayers married filing jointly who have access to workplace savings plans, those making $104,000 or less may
deduct the full amount of their contributions. T hose making $124,000 or more may not deduct any of their
contributions.
127 Income thresholds varied based on tax filing status.
128 See Sarah Holden et al., The Individual Retirement Account at Age 30: A Retrospective, ICI, 2006, Figure 3,
https://www.retirementplanblog.com/wp-content/uploads/sites/304/2006/11/per11-01.pdf.
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annual report for a participant.129 The annual report must contain, among other items, information
on the amount of contributions to and distributions from the account and the name and address of
the trustee or issuer.130
Unlike DC plans (as required by the SECURE Act), IRA providers are not required to provide
lifetime income disclosures to participants. The SECURE Act required that, following DOL
guidance, private sector DC plans include these disclosures in their annual benefit statements to
participants.131 Lifetime income disclosures provide information on how a participant’s total DC
balance would be converted into a lifetime income stream (e.g., in terms of monthly payments
during retirement).132 These disclosures might help participants better evaluate the adequacy of
their retirement savings. There appears to be little research on the effect of such disclosures,
though one study found that participants who were given income projections and information
about how to change plan enrollment were more likely to increase contribution levels than were
participants without this information.133
Leakages from IRAs
Early withdrawals, or those taken before an individual reaches age 59½, are sometimes referred
to as leakages. Some stakeholders are interested in minimizing leakage, because it can negatively
affect individuals’ future retirement income (though individuals could later contribute enough to
make up for lost savings).134 Other stakeholders are less concerned with early access to retirement
funds, citing retirement accounts’ ability to double as emergency savings funds.135 Flexibility to
access IRA funds prior to retirement could factor into an individual’s initial decision to use an
IRA for savings.136 However, flexibility might also cause individuals to draw down IRA assets
prior to retirement and erode these savings.
To discourage pre-retirement withdrawals, the Internal Revenue Code general y imposes a 10%
tax penalty on the taxable amount of withdrawals before an individual reaches age 59½, dies, or
becomes disabled. The penalty does not apply if the reason for the distribution is listed in Title

129 See 26 C.F.R. §1.408-5, Annual reports by trustees or issuers.
130 An endowment contract is a type of annuity that also provides life insurance protection.
131 DOL released an interim final rule in August 2020, available at https://www.dol.gov/agencies/ebsa/key-
topics/retirement/lifetime-income.
132 T he SECURE Act specified that monthly payment amounts be calculated based on a single life an nuity and a
qualified joint and survivor annuity (QJSA) using assumptions as prescribed by DOL. In a single life annuity, one
participant receives a monthly benefit until death. In a QJSA, a surviving spouse continues to receive monthly benefit
after a spouse’s death. Single life annuities generally provide higher monthly payments than QJSAs do. T his
information may benefit participants by providing a long-term perspective on savings, which might better inform
participants about their financial situations in retirement.
133 See Gopi Shah Goda, Colleen Flaherty Manchester, and Aaron Sojourner, What will My Account Really Be Worth?
An Experim ent on Exponential Growth Bias and Retirem ent Saving , NBER Working Paper 17927, March 2012,
https://www.nber.org/papers/w17927.pdf.
134 See Office of Senator Mike Enzi, “ Kohl, Enzi Offer Legislation to Protect 401(k) Retirement Savings,” press
release, May 18, 2011, https://www.enzi.senate.gov/public/index.cfm/2011/5/kohl-enzi-offer-legislation-to-protect-
401-k-retirement-savings.
135 See Anne T ergesen and Alice Uribe, “Should You T ap Retirement Funds in a Crisis? Increasingly, People Say
Yes,” Wall Street Journal, June 4, 2020, https://www.wsj.com/articles/should-you-tap-retirement-funds-in-a-crisis-
increasingly-people-say-yes-11591283926.
136 See Robert Argento, Victoria Bryant, and John Sabelhaus, Early Withdrawals from Retirement Accounts During the
Great Recession, November 2013, https://www.irs.gov/pub/irs-soi/14rpearlywithdrawalretirement.pdf.
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26, Section 72(t), of the U.S. Code. Exceptions for the penalty for early withdrawals from IRAs
(but not DC plans) include withdrawals for certain higher education expenses, health insurance
premiums, and “first-time” home purchases.
Some stakeholders have questioned the disparate treatment of IRA and DC penalty exceptions.137
For example, individuals with IRAs may withdraw funds for qualified higher education expenses
penalty-free, but individuals with 401(k) plans may not. Even if a 401(k) plan permits
withdrawals for higher education expenses due to employee hardship, the penalty would stil
apply. In addition, individuals with DC plans who retire during or after the year they turn age 55
(age 50 for qualified public safety officers) are not subject to the 10% penalty, but those with an
IRA are.138
In addition to the exceptions provided in Title 26, Section 72(t), of the U.S. Code, Congress has
exempted early IRA and DC plan withdrawals from the penalty following certain past events,
including multiple natural disasters and the COVID-19 pandemic.139 In these cases, Congress has
al owed individuals to recontribute amounts to accounts. Amounts that are recontributed do not
count toward contribution limits.
While leakage can occur when an individual withdraws funds for a specific reason (e.g., higher
education or medical expenses), it can also occur—intentional y or unintentional y—during the
rollover process. Rollovers are classified as (1) direct transfers, (2) trustee-to-trustee transfers,
and (3) 60-day rollovers. In direct transfers and trustee-to-trustee transfers, funds are moved
directly from one account to another or the individual receives a check made payable to the new
account. In a 60-day rollover, an individual receives a check with an amount payable to the
individual and has 60 days to roll over the amount to another retirement account. In a 60-day
rollover, an employer-sponsored DB or DC retirement plan must withhold 20% of the amount for
income tax purposes and the individual must use other funds to roll over the full amount of the
distribution.140 Any portion of the distribution not rolled over is included in taxable income. IRA
distributions are subject to 10% withholding for income tax purposes unless the individual opts
out of withholding or chooses a different withholding amount.
Amounts that are not rolled over within 60 days are sometimes described as cashouts and are
general y considered to be leakage from retirement savings. The cashout amount may also be
includible in taxable income and subject to the 10% early withdrawal penalty. The Government
Accountability Office (GAO) found that cashouts of 401(k) account balances of $1,000 or more
from account owners aged 25-55 totaled $9.8 bil ion in 2013.141
Data on Early Withdrawals from IRAs
Estimates of leakages from IRAs vary widely, perhaps due to varying definitions of which
withdrawal situations are included as leakages or because individuals taking withdrawals from
IRAs are not required to report the reason for doing so. Some researchers consider any taxable

137 See Natalie Choate, “T he 401(k) Early Withdrawal Penalty: It’s Not Fair!,” Morningstar, December 14, 2018,
https://www.morningstar.com/articles/904454/the-401k-early-withdrawal-penalty-its-not-fair.
138 See 26 U.S.C. §72(t).
139 See CRS Report R45864, Tax Policy and Disaster Recovery.
140 See IRS, “Rollovers of Retirement Plan and IRA Distributions,” https://www.irs.gov/retirement -plans/plan-
participant -employee/rollovers-of-retirement-plan-and-ira-distributions.
141 GAO, Retirement Savings: Additional Data and Analysis Could Provide Insight into Early Withdrawals, GAO 19-
179, March 2019, p. 12, https://www.gao.gov/products/GAO-19-179.
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withdrawal from IRAs—even those that are exempt from the 10% penalty, such as withdrawals
for higher education expenses—to be leakage, because there is no guarantee that the individual
wil eventual y replace these funds, while others focus on penalized taxable distributions only.142
The GAO found that in 2013, 12% of individuals aged 25-55 withdrew about $39.5 bil ion (in
2017 dollars) from their IRAs.143 This amount corresponded to about 3% of that group’s IRA
assets in that year.144 GAO’s 2013 estimate included penalized and non-penalized distributions
and exceeds ICI’s 2018 estimate, which found that 3% of non-retired traditional IRA owners took
withdrawals.145
Other researchers found that about half of taxable distributions for individuals under age 55 were
penalized distributions.146 These researchers estimated that in 2010, the following groups of
taxpayers withdrew penalized amounts from retirement accounts (which includes both IRAs and
DC plans):
 3.8% of those younger than age 50,
 4.8% of those aged 50-54, and
 3.9% of those aged 55-58.147
The average penalized withdrawal amount for taxpayers under age 50 was $8,100.148 About half
of penalized withdrawals were less than $3,100.149
Stakeholders may be interested in knowing if early withdrawal incidence changes during or
following an economic decline. In response to the 2007-2009 recession, researchers found that
early withdrawal incidence modestly increased. In 2004, about 13.3% of taxpayers under age 55
with pension coverage or retirement accounts (which include IRAs and DC plans) took taxable
distributions, compared to 13.7% in 2007 and 15.4% in 2010.150
Leakages from IRAs: Policy Options and Considerations
Though estimates of the amount of leakages differ, it appears that the majority of IRA owners do
not take early withdrawals in a given year. However, should policymakers be interested in either

142 For example, Argento, Bryant, and Sabelhaus (Early Withdrawals from Retirement Accounts During the Great
Recession) estimate leakages using taxable distributions and taxable penalized distributions, noting that “ whether or not
a penalty applies to the early withdrawal depends on factors that may or may not be indicative of the ‘leakage’ concept
we are trying to capture.” Peter Brady and Steven Bass (Decoding Retirement: A Detailed Look at Retirement
Distributions Reported on Tax Returns, January 21, 2020, https://www.irs.gov/pub/irs-soi/20rpdecodingretirement.pdf)
estimate leakages using penalized distributions.
143 T his amount is equivalent to $42.0 billion in 2020 dollars.
144 See GAO, Retirement Savings, p. 11.
145 See Sarah Holden and Daniel Schrass, The Role of IRAs in US Households’ Saving for Retirement, ICI, 2019, Figure
24, https://www.ici.org/pdf/per25-10.pdf.
146 Holden and Schrass, The Role of IRAs in US Households’ Saving for Retirement.
147 See Brady and Bass, Decoding Retirement. IRAs and employer-sponsored DC plans estimates are reported jointly.
Unpenalized taxable distributions include, among others, payments made to beneficiaries after inheriting accounts,
those to an account owner who becomes disabled before reaching age 59½, and payments to an alternate payee under a
qualified domestic relations order. IRAs also do not penalize distributions used for the purchase of a first -time home,
qualified education expenses, and those by unemployed individuals for health insurance premiums.
148 Brady and Bass, Decoding Retirement. T his estimate refers to employer-sponsored DC plans and IRAs.
149 Brady and Bass, Decoding Retirement.
150 See Argento, Bryant, and Sabelhaus, Early Withdrawals from Retirement Accounts During the Great Recession .
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expanding withdrawal flexibility (essential y, treating IRAs as tax-preferred savings accounts
rather than as retirement accounts) or reducing leakages, available policy options include
permitting IRA loans, al owing recontributions for certain withdrawals, and increasing the age at
which the early withdrawal penalty applies.
Permit IRA Loans
Loans are not permitted from IRAs.151 Loans may be preferable to withdrawals because
individuals can pay back the borrowed amounts—with interest—to their own accounts, which
may help preserve retirement savings. However, an account balance may not grow to the same
extent had the individual not taken a loan. In addition, an individual could default on the loan and
may be subject to tax and penalties on the outstanding balance. IRA loans could reduce early
withdrawals but might also create administrative difficulties for providers. For example, IRA
providers may have to manage the logistics of repayments and communicate to participants when
they miss payments or default on a loan.152
Allow Recontributions for Certain Withdrawals
Congress could expand the circumstances in which individuals are permitted to recontribute
amounts that were withdrawn. In response to certain past natural disasters and the COVID-19
pandemic, qualifying individuals may recontribute amounts withdrawn from retirement
accounts.153 Al owing recontributions could help individuals restore their retirement savings,
though it could modify IRAs from serving as tax-advantaged retirement accounts to serving as
tax-advantaged savings accounts.
Increase Age Before Which 10% Penalty Applies
A GAO report mentions that increasing the age before which the 10% early withdrawal penalty
applies from 59½ to 62 would align with the earliest age that an individual can claim Social
Security benefits and, therefore, “may encourage individuals to consider a more comprehensive
retirement strategy.”154 However, raising this age may penalize individuals who shift to working
part-time and use IRA assets as supplemental income or individuals who lose their jobs later in
their careers and need to access assets. As previously mentioned, individuals with DC plans who
separate from their employers during or after the year in which they turn age 55 (age 50 for
qualified public safety officers) are permitted to withdraw funds from their employer-sponsored
DC accounts penalty-free, while individuals with IRAs are not. In addition, an increase in the age
at which the penalty no longer applies could discourage individuals from using IRAs to save for
retirement.

151 Some may refer to the process of withdrawing from an IRA and then subsequently rolling it back to the same or
different account within the 60-day rollover deadline as an IRA loan. T his is an unofficial term that is distinct from an
actual loan with loan terms. A 401(k) plan may, but is not required to, offer loans. In general, individuals may borrow
the lesser of 50% of their vested 401(k) account balance or $50,000.
152 See GAO, Retirement Savings, p. 31. Loans from DC plans are typically repaid via payroll deduction, which is not a
tool available to IRA providers.
153 See, for example, Section 2202 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-
136). Amounts may be recontributed over a three-year period.
154 See GAO, Retirement Savings, p. 31. For more information on claiming Social Security benefits, see CRS Report
R42035, Social Security Prim er.
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Asset Drawdown
Determining the optimal strategy for withdrawing IRA and other retirement assets can be a
chal enging task for many households. This task factors in a household’s expected longevity, tax
consequences, future financial needs, and any bequest motives, among others. Nearly al
individuals with IRAs also receive monthly benefits from Social Security, which likely insulates
them from being without income but also introduces another income source to consider into the
drawdown decision.155
To ensure that retirees use assets in their tax-advantaged retirement accounts primarily for
retirement purposes rather than for estate planning or as a tax shelter, an individuals with a
traditional IRA is required by law to withdraw a specified amount each year after reaching 72,
referred to as a required minimum distribution (RMD).156 Failure to take the RMD results in a
50% excise tax on the amount that was required to have been distributed.157 Roth IRAs are not
subject to RMDs, though beneficiaries who inherit Roth IRAs may be.158
Strategies to withdraw from IRAs include withdrawals based on RMDs, “the 4% rule,” fixed-
dollar withdrawals, fixed-percentage withdrawals, systematic withdrawals, or a “buckets”
strategy.159 Another strategy is for households to use IRA assets to delay claiming Social Security
(and thus, receive larger Social Security benefits than if they had claimed earlier).160
Other households may choose to guarantee lifetime payments by purchasing an annuity.161 An
annuity is a stream of monthly payments in exchange for a lump-sum dollar amount, general y
purchased through an insurance company or purchased over time as part of an investment
option.162 Annuities come in multiple forms. A fixed annuity guarantees a specified monthly
payment, while the payment amount of a variable annuity fluctuates with the value of the
underlying investments. Annuities also differ based on the payment schedule: An immediate
annuity begins payments to the purchaser shortly after purchase, while a deferred annuity starts
payment at a specified date in the future. The duration of annuity payments can be based on a

155 See Dushi, Iams, and T renkamp, “The Importance of Social Security Benefits to the Income of the Aged
Population.”
156 See 26 U.S.C. §401(a)(9). T hough individuals must take yearly withdrawals, they are not required to spend
withdrawal amounts and could instead place them in a taxable account. T he SECURE Act, passed in December 2019,
included a provision that increased the age after which individuals must begin receiving RMDs from traditional IRAs
from 70½ to 72. Individuals who turned age 70½ on or after January 1, 2020, must begin taking RMDs after reaching
age 72.
157 In two instances, Congress has suspended the penalty for failing to take the RMD—in 2009 and 2020, following the
2007-2009 economic recession and the 2020 COVID-19 pandemic, respectively. For more information, see CRS
Insight IN11349, The CARES Act and Required Minim um Distributions (RMDs): Options for Certain Individuals.
158 For more information on the SECURE Act and inherited accounts, see CRS In Focus IF11328, Inherited or
“Stretch” Individual Retirement Accounts (IRAs) and the SECURE Act.
159 For example, a household that chooses a fixed-dollar withdrawal takes out the same amount over several years.
Households that choose a systematic withdrawal strategy withdraw only investment income so that the principal can
continue to grow. For more information on these methods, see BlackRock, “ What Are My Retirement Withdrawal
Strategies?,” https://www.blackrock.com/us/individual/education/retirement/withdrawal-rules-and-strategies.
160 See Susan Garland, “T ap an IRA Early, Delay Social Security,” Kip linger, April 26, 2013,
https://www.kiplinger.com/article/retirement/t051 -c000-s004-tap-an-ira-early-delay-social-security.html. For Social
Security claiming ages, see CRS Report R44670, The Social Security Retirem ent Age.
161 Note that households who purchase annuities equal to 100% of their IRA assets would no longer be considered IRA -
owning households.
162 Annuity contracts are generally regulated by state law.
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single life or structured as a joint-and-survivor annuity, which continues to provide payments to a
surviving spouse after an individual dies.
Data on Asset Drawdown Patterns and Annuities for IRA-Owning
Households
Because the SCF does not collect data on the same households over time, it is difficult to
determine drawdown patterns and, relatedly, the incidence of households outliving assets.
Households that had an IRA but exhausted their assets before 2019 would not be included in the
SCF data as IRA-owning households. It is possible that households that have exhausted their
assets used their IRA savings strategical y, such as to delay claiming Social Security benefits. It is
also possible that these households exhausted funds for living expenses and now face financial
insecurity.
Using its own database, ICI found that 94% of traditional IRA-owning households aged 70 and
older took withdrawals based on their RMD amount in tax year 2018.163 Original owners of Roth
IRAs are not subject to RMDs: ICI found that 5.9% of Roth IRA owners aged 70 or older took
withdrawals in tax year 2016.164
At the end of 2019, 7.2% of U.S. retirement assets were held in annuities.165 CRS analysis of the
SCF indicated that 4.7% of households had annuities in 2019. Annuities have not been popular in
practice, perhaps because Social Security already provides lifetime payments or because retirees
are hesitant to pay a relatively large lump sum in exchange for smal er monthly payments.166 In
addition, an individual who wishes to make bequests or wants greater withdrawal flexibility
might prefer to maintain an IRA over an annuity.
IRA Asset Drawdown: Policy Options and Considerations
Asset drawdown can be a complicated decision for households. On one hand, households risk
outliving their savings by withdrawing their funds too early. On the other hand, households risk
reducing their consumption to a degree that affects their standard of living by withdrawing too
conservatively in earlier retirement years. Policymakers have proposed options that would
increase drawdown flexibility for households by (1) increasing the age after which traditional
IRA owners must begin taking RMDs or (2) eliminating the RMD for traditional IRA owners
with account balances below a specified threshold.167

163 See Holden and Schrass, The Role of IRAs in US Households’ Saving for Retirement, Figure 24.
164 See ICI, The IRA Investor Profile: Roth IRA Investors’ Activity, 2007 -2016, Figure 4.2.
165 CRS analysis of data in ICI, The US Retirement Market, Fourth Quarter 2019, T able 1. U.S. retirement assets
included public and privat e DB plans, DC plans, annuities, and IRAs.
166 For more information on the “annuity puzzle,” see Fiona Stewart, “Policy Issues for Developing Annuities
Markets,” OECD Working Papers on Insurance and Private Pensions No. 2, January 2007,
https://www.oecd.org/daf/fin/insurance/37977188.pdf; and Martin Baily and Benjamin Harris, “ Can Annuities Become
a Bigger Contributor to Retirement Security?,” Brookings Institution, June 20 19, https://www.brookings.edu/wp-
content/uploads/2019/06/ES_20190624_BailyHarris_Annuities.pdf .
167 T hough not discussed in this report, some researchers have proposed Individual T ontine Accounts as a way to
provide lifetime income to retirees. For more information, see Richard Fullmer and Michael Sabin, “Individual T ontine
Accounts,” Journal of Accounting and Finance, vol. 19, no. 8 (2018), doi.org/10.33423/jaf.v19i8.2615.
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Policymakers seeking to expand or promote lifetime income options may be interested in policies
surrounding annuities.168 One type of deferred annuity—the qualifying longevity annuity contract
(QLAC)—is currently available to IRA owners. Individuals who purchase a QLAC receive
guaranteed lifetime income payments that begin at a specified age (as late as age 85). Modifying
rules surrounding QLACs could increase their usage.
Increase Age to Begin Taking RMDs from Traditional IRAs
The SECURE Act increased the age after which RMDs must begin from 70½ to 72. Some
policymakers have proposed further increasing this age, which could al ow funds to remain in the
account for a longer period of time and continue to accrue investment earnings.169 As previously
mentioned, the RMD assures that tax-deferred retirement accounts that have been established to
provide income during retirement are not used as permanent tax shelters or as vehicles for
transmitting wealth to heirs.
The benefits of this policy would likely accrue to households that have the ability to further
postpone account withdrawals rather than households that rely on annual withdrawals to meet
necessary expenses. However, this policy may better align with an aging workforce and increased
longevity.170
Eliminate RMD for Certain Traditional IRA Owners
Eliminating RMDs for traditional IRA-owning households with balances under a specified
threshold is another policy option.171 Congress has twice suspended the RMD—in 2009, in
response to the 2007-2009 recession, and in 2020, in response to the COVID-19 pandemic. Two
separate studies on the 2009 RMD suspension—using different samples—found that roughly one-
third of individuals subject to RMD rules who took distributions in 2008 did not take them in
2009.172 In both studies, the likelihood of not taking a distribution increased with account balance
and decreased with an account holder’s age. It is unclear how many households would benefit
from this policy, as households with lower retirement assets may rely on annual withdrawals
regardless of whether they are required.

168 Most recently, the SECURE Act included a provision that aimed to facilitate greater adoption of annuity distribution
options in DC plans by creating a safe harbor for annuity provider selection. Future research will be helpful in
determining if the provision increases annuity usage. T he SECURE Act’s provision did not apply to IRAs, as many
IRA providers already offer annuity products. See Section 109 of Division O of P.L. 116-194.
169 See, for example, S. 1431 and H.R. 8696 in the 116th Congress. S. 1431 would increase the age to 75 for calendar
years after 2029.
170 See U.S. Senate Special Committee on Aging, America’s Aging Workforce: Opportunities and Challenges,
December 2017, https://www.aging.senate.gov/imo/media/doc/Aging%20Workforce%20Report%20FINAL.pdf ; and
U.S. House Committee on Ways and Means, Chairman Richard E. Neal, The Setting Every Com m unity Up For
Retirem ent Enhancem ent Act of 2019,
https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/SECURE%20Act%20secti
on%20by%20section.pdf.
171 See, for example, S. 1431 and H.R. 8696 in the 116th Congress. T hese bills include provisions that would eliminate
the RMD for individuals whose aggregate retirement savings do not exceed $100,000.
172 See Jacob A. Mortenson, Heidi R. Schramm, and Andrew Whitten, "T he Effects o f Required Minimum Distribution
Rules on Withdrawals from T raditional IRAs," National Tax Journal, vol. 72, no. 3 (September 2019); and Jeffrey
Brown, James Poterba, and David Richardson, "Do Required Minimum Distributions Matter? T he Effect of the 2009
Holiday on Retirement Plan Distributions," NBER Working Paper 20464, September 2014,
http://www.nber.org/papers/w20464. In 2009, RMDs had to begin after account owners reached age 70½.
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Since Roth IRAs are not subject to RMDs, eliminating them for individuals with traditional IRAs
(even if under a threshold account balance) would result in disparate tax treatment for individuals
who instead chose to save using a Roth IRA. Contributions to Roth IRAs are not deductible from
taxable income (and therefore described as “after-tax” contributions). Eliminating the RMD for
traditional IRAs would al ow individuals to defer taxes throughout their entire lives, resulting in
disparate tax treatment.
Modify Rules Surrounding QLACS
In 2014, a Treasury regulation created a type of deferred annuity cal ed a qualifying longevity
annuity contract (QLAC).173 Individuals with DC plans or traditional IRAs can use savings to
fund QLACs, which guarantee lifetime income payments that begin at a specified age (as late as
age 85). Individuals can use 25% of their account balance—up to $135,000—to purchase
QLACs. The amount used to purchase a QLAC is not subject to RMDs until the account owner
turns age 85. This al ows account owners to defer taxation on QLAC assets until that point.
Stakeholders have suggested several modifications to QLAC rules that may increase usage of this
lifetime income option. These include increasing the amount that can be used to purchase QLACs
and clarifying protections for surviving spouses for QLACs with joint-and-survivor annuities
following divorce.174 In the 116th Congress, S. 1431 and H.R. 8696 include both of these
provisions.
Though QLACs can provide retirees with a lifetime income option, they may not be widely used
because of some of the same reasons that annuities are not widely used. In addition, low interest
rates are general y associated with decreased annuity purchases: Total annuity sales in the first six
months of 2020 were 16% lower than sales in the same time period of 2019.175 As of September
2020, interest rates are hovering around 0.13%.176
Given that QLACs are a relatively new type of annuity option, there does not appear to be much
research on existing household QLAC usage. In addition, many surveys used to study retirement
income do not include questions about QLAC holdings.177 Future research could provide insight
into the usage and benefits, if any, of QLACs.

173 See 26 C.F.R. Parts 1 and 602.
174 See Insured Retirement Institute, 2020 Federal Retirement Security Blueprint,
https://www.myirionline.org/docs/default -source/advocacy-files/2020-blueprints/iri_federal_advocacy-
blueprint_2020.pdf.
175 See Retirement Income Journal, “ Low Interest Rates Shock Sales of Most Annuities,” August 20, 2020,
https://retirementincomejournal.com/article/low-interest -rates-shock-sales-of-most-annuities/.
176 See 1-Year T reasury Bill: Secondary Market Rate, FRED, Federal Reserve Bank of St. Louis, September 18, 2020,
https://fred.stlouisfed.org/series/DT B1YR.
177 See Constantijn Panis and Michael Brien, “Innovations and T rends in Annuities: Qualifying Longevity Annuity
Contracts,” October 24, 2016,
https://www.dol.gov/sites/dolgov/files/EBSA/researchers/analysis/retirement/innovations-and-trends-in-annuities.pdf.
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Appendix A. Traditional IRA Deductibility Rules
Deductibility of traditional IRA contributions depends on tax filing status, AGI, and whether the
individual (or spouse, if applicable) is covered by a workplace retirement plan.
Table A-1. Deductibility of Traditional IRA Contributions for Individuals
Not Covered by Retirement Plans at Work for 2019 and 2020
Deduction
Filing Status
2019 AGI
2020 AGI
Allowed
Single, head of household, qualifying widow(er), or
Any amount
Any amount
Ful deduction
married filing jointly or separately with a spouse
who is not covered by a plan at work
$193,000 or less
$196,000 or less
Ful deduction
Married filing jointly with a spouse who is covered
More than
More than
Partial
by a plan at work
$193,000 but less
$196,000 but less
deduction
than $203,000
than $206,000
$203,000 or more
$206,000 or more
No deduction
Less than $10,000
Less than $10,000
Partial
Married filing separately with a spouse who is
deduction
covered by a plan at work
$10,000 or more
$10,000 or more
No deduction
Source: IRS Publication 590-A, http://www.irs.gov/publications/p590a/ and 2020 Limitations Adjusted as Provided in
Section 415(d), etc., Notice 2019-59, https://www.irs.gov/pub/irs-drop/n-19-59.pdf.
Table A-2. Deductibility of Traditional IRA Contributions for Individuals
Covered by Retirement Plans at Work for 2019 and 2020
Deduction
Filing Status
2019 AGI
2020 AGI
Allowed
$64,000 or less
$65,000 or less
Ful deduction
More than $64,000 but less
More than $65,000 but less
Partial deduction
Single or head of household
than $74,000
than $75,000
$74,000 or more
$75,000 or more
No deduction
$103,000 or less
$104,000 or less
Ful deduction
Married filing jointly or
More than $103,000 but less
More than $104,000 but less
Partial deduction
qualifying widow(er)
than $123,000
than $124,000
$123,000 or more
$124,000 or more
No deduction
Less than $10,000
Less than $10,000
Partial deduction
Married filing separately
$10,000 or more
$10,000 or more
No deduction
Source: IRS Publication 590-A, http://www.irs.gov/publications/p590a/ and 2020 Limitations Adjusted as Provided in
Section 415(d), etc., Notice 2019-59, https://www.irs.gov/pub/irs-drop/n-19-59.pdf.

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Appendix B. Roth IRA Eligibility and Contribution
Limits
Roth IRA eligibility is limited by income. Contributions are phased out as individuals approach
the income threshold based on their filing status.
Table B-1. Roth IRA Eligibility and Contribution Limits in 2019 and 2020
2019 Contribution
2020 Modified
2020 Contribution
Filing Status
2019 AGI
Limits
AGI
Limits
$6,000 ($7,000 if 50
$6,000 ($7,000 if 50
years or older) or
years or older) or
Less than $122,000
Less than $124,000
Single, head of
AGI, whichever is
AGI, whichever is
household, married
smal er
smal er
filing separately (and
At least $122,000
At least $124,000
did not live with
but less than
Reduced
but less than
Reduced
spouse at any time
$137,000
contribution limit
$139,000
contribution limit
during the year)
Ineligible to
Ineligible to
$137,000 or more
contribute
$139,000 or more
contribute
Married filing
Less than $10,000
Reduced
Less than $10,000
Reduced
separately and lived
contribution limit
contribution limit
with spouse at any
Ineligible to
Ineligible to
time during the year
$10,000 or more
contribute
$10,000 or more
contribute
$6,000 ($7,000 each
$6,000 ($7,000 each
if 50 and older) or
if 50 and older) or
Less than $193,000
AGI, whichever is
Less than $196,000
AGI, whichever is
smal er
smal er
Married filing jointly,
At least $193,000
At least $196,000
qualifying widow(er)
but less than
Reduced
but less than
Reduced
$203,000
contribution limit
$206,000
contribution limit
$203,000 or more
Ineligible to
$206,000 or more
Ineligible to
contribute
contribute
Source: IRS Publication 590-A, http://www.irs.gov/publications/p590a/; and IRS, “401(k) Contribution Limit
Increases to $19,500 for 2020; Catch-Up Limit Rises to $6,500,” press release,
https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19500-for-2020-catch-up-limit-rises-to-6500.
Notes: Individuals aged 50 and older can make additional $1,000 catch-up contributions. The AGI limit for
eligibility has been adjusted for inflation since 2007. Beginning in 2009, the traditional and Roth IRA contribution
limit has also been adjusted for inflation. A worksheet for computing reduced Roth IRA contribution limits is
provided in IRS Publication 590-A.
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Appendix C. Equivalence of Traditional and Roth
IRAs
Traditional and Roth IRAs provide an individual with identical amounts to spend in retirement if
(1) tax rates are the same at the time of contribution and withdrawal and (2) there is equal
investment growth in the traditional and Roth accounts. In a traditional IRA, the contribution is
deducted from taxable income and can accrue investment returns until withdrawal. At the time of
withdrawal, the withdrawal amount is included in taxable income.
In a Roth IRA, the contribution is not deductible (and so is made with “after-tax” income). In the
example below, an individual contributing 10% of either pre-tax income (traditional) or post-tax
income (Roth) would contribute $5,000 to a traditional IRA and, with a 25% tax rate, a $3,750
contribution to a Roth IRA.
At the time of withdrawal (assuming retirement age), the $3,750 contribution to the Roth IRA,
assuming a 50% investment return, would amount to $5,625 to spend in retirement. The original
$5,000 contribution to a traditional IRA, also assuming a 50% investment return, would amount
to $7,500 but, after facing a 25% tax rate, would also equal $5,625.
Table C-1. Equivalence of Traditional and Roth IRA Distributions

Traditional Account
Roth Account
Contributions

Income
$50,000
$50,000
Contribution to traditional account (10% of income)
$5,000
–
Taxable income
$45,000
$50,000
Taxes paid (25% tax rate)
$11,250
$12,500
After-tax income
$33,750
$37,500
Contribution to Roth account (7.5% of income, 10% of
–
$3,750
after-tax income)
Income after taxes and retirement plan contributions
$33,750
$33,750
Distributions

Future account balance (assume 50% investment
$7,500
$5,625
growth)
Taxes paid on distribution from traditional account
$1,875
–
(25% tax rate)
Amount to spend from retirement accounts
$5,625
$5,625
Taxes paid
$13,125
$12,500
Source: Congressional Research Service.
Notes: “Al else being equal” includes assumptions such as (1) the identical effective tax rate on income when
the funds are contributed and distributed and (2) equal investment growth in the traditional and Roth accounts.
In practice, households typical y have lower effective taxes in retirement than when working. For il ustrative
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Individual Retirement Account (IRA) Ownership: Data and Policy Issues

purposes, an effective income tax rate of 25% and an investment return of 50% are assumed. The equivalence
result does not depend on the time frame or on using specific tax and investment growth rates.
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Individual Retirement Account (IRA) Ownership: Data and Policy Issues

Appendix D. Retirement Savings Contribution
Credit
The Retirement Savings Contribution Credit is a tax credit available to taxpayers who contribute to employer-
sponsored DC retirement plans or IRAs.
Table D-1. Retirement Savings Contribution Credit in 2019 and 2020
Filing Status
2019 Income Limits
2020 Income Limits
Percentage Credit
Single, married filing separately,
$1-$19,250
$1-$19,500
50%
qualifying widow(er)
$19,251-$20,750
$19,501-$21,250
20%
$20,751-$32,000
$21,251-$32,500
10%
more than $32,000
more than $32,500
0%

Head of household
$1-$28,875
$1-$29,250
50%
$28,876-$31,125
$29,251-$31,875
20%
$31,126-$48,000
$31,876-$48,750
10%
more than $48,000
more than $48,750
0%

Married filing jointly
$1-$38,500
$1-$39,000
50%
$38,501-$41,500
$39,001-$42,500
20%
$41,501-$64,000
$42,501-$65,000
10%
more than $64,000
more than $65,000
0%
Source: IRS Publication 590-A, http://www.irs.gov/publications/p590a/; and IRS, “401(k) Contribution Limit
Increases to $19,500 for 2020; Catch-Up Limit Rises to $6,500,” press release,
https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19500-for-2020-catch-up-limit-rises-to-6500.
Notes: Individuals aged 50 and older can make additional $1,000 catch-up contributions. The AGI limit for
eligibility has been adjusted for inflation since 2007. Beginning in 2009, the traditional and Roth IRA contribution
limit has also been adjusted for inflation. A worksheet for computing reduced Roth IRA contribution limits is
provided in IRS Publication 590-A.

Author Information

Elizabeth A. Myers

Analyst in Income Security

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Disclaimer
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