Summary
IRA and Keogh Assets and Contributions
• Major source of retirement assets—Combined, individual retirement accounts (IRAs) and Keoghs (for the self-employed) account for a sizable portion of the assets held by Americans in tax-preferred retirement plans and are likely to become the single largest source of retirement income outside of Social Security benefits for private-sector workers.
• IRA growth trend returns—IRA asset levels increased continuously from 1981 through 1999 before declining for three consecutive years from 2000 through 2002. In 2003, the IRA asset level increased to a new historical high of $3.08 trillion before rising again in 2004 to $3.48 trillion, indicating that the significant growth trend that total IRA assets enjoyed for the approximately 20 years (prior to the stock market retrenchment starting in 2000) has returned.
• Self-management of assets a big question—The accumulation of assets in individual accounts raises important questions for the ultimate distribution of these assets: Will retirees be able to manage these assets so as not to outlive them? Do individuals understand that life expectancy is an average, and not a definite number? Are individuals aware of and/or do they understand products such as annuities that insure against longevity risk? The build-up of IRA assets alone is not enough to ensure these assets will ultimately be successful in providing Americans security in retirement.
Income of the Elderly Population, Age 65 and Over, 2004
• Social Security remains most important—In 2004, Social Security was the largest source of income for those currently age 65 and older, accounting for about 42 percent of their income on average. Pension and retirement plan income accounted for 21 percent, income from assets 13 percent, and earnings 23 percent.
• Median income declining—The median (midpoint) income level of the elderly population increased from $11,679 in 1974 to $15,407 in 1999, and declined to $15,043 in 2004 (in constant dollars).