Roth IRA Statistics: what are the key insights about Roth IRA savings accounts?
With Roth Individual Retirement Accounts (IRAs) growing increasingly popular, it’s helpful to explore the latest Roth IRA statistics and how these differ from those of traditional IRAs.
Highlights
Roth IRAs are increasingly gaining popularity against traditional IRAs in the US.
By 2021, around 25% of IRAs were Roth IRAs, and most Roth IRA investors are under the age of 40
From 2025, catch-up contribution limits for certain retirement plans will increase to $10,000 per year.
What is the difference between Roth and traditional IRAs?
According to the Investment Company Institute, in 2022, roughly $13.9 trillion was held in Roth Individual Retirement Accounts (IRA) of all types in the US.
For some investors, the benefits of a Roth IRA far exceed those of traditional IRAs, particularly for those who begin investing at a young age:
While traditional IRAs are subject to tax deductions on contributions, Roth IRAs are not.
Tax is owed on a Roth IRA savings account’s earnings or contributions in retirement, whereas the opposite is true of Traditional IRAs.
Traditional IRAs are also subject to required minimum distributions (RMDs), whereas there are no RMDs on IRAs within the account holder’s lifetime.
Early distributions in traditional IRAs incur tax and a 10% penalty; Roth IRAs only incur these on early earnings distributions.
Despite the benefits of Roth IRAs, traditional IRAs remain the most popular option.
In 2021, of the nearly 48 million US households with IRAs, over 75% (36.6 million) of these have traditional IRAs, per Statista.
However, studies show that Roth IRAs are becoming increasingly popular.
How popular are Roth IRAs?
Roth IRA statistics show that their popularity has been on the increase in recent years, particularly among the youngest generation of investors.
Multinational financial services corporation Fidelity Investments reported a 7.8% increase in Roth IRA (with contributions) uptake among millennials in the second quarter of 2012. The Investment Company Institute indicated that most Roth IRA holders were younger than 40 at that time.
The benefit of Roth IRAs for younger investors is that they allow for penalty- and tax-free withdrawals of original contributions at any time and for any reason. This makes them an ideal safety net for young investors who are still many years away from retirement.
What are the average Roth IRA interest rates?
Roth IRA interest rates do not actually exist. This is because Roth IRAs aren't investments, so they don’t pay or earn interest.
Nevertheless, the investments held within Roth IRA portfolios can yield returns over time.
What is the average Roth IRA rate of return?
While your Roth IRA does not earn interest on its own (like, say, a savings account), the investments within it do earn interest.
According to SmartAsset, the average Roth IRA rate of return was between 7% and 10% in 2023.
Do people consult a financial professional when creating an IRA?
It is important to seek professional advice about how to create a Roth IRA. This advice could come from an investment professional or a direct source, such as a mutual fund or brokerage firm.
The Investment Company Institute revealed that 68% of all Roth IRA owners sought advice from a financial professional before creating these accounts in 2022.
Financial professionals can inform you of the benefits of a Roth IRA versus other options and point you toward the best Roth IRA investments.
What are the Roth IRA limits?
Depending on your circumstances, there are limitations to the amount you can put into your IRA.
Per the latest IRS publication, your Roth IRA limits are as follows, depending on your filing status and adjusted gross income (AGI):
| If your filing status is | And your modified AGI is | Then you can contribute |
|---|---|---|
| married filing jointly or qualifying widow(er) | < $218,000 | up to the limit |
| married filing jointly or qualifying widow(er) | > $218,000 but < $228,000 | a reduced amount |
| married filing jointly or qualifying widow(er) | > $228,000 | zero |
| married filing separately, and you lived with your spouse at any time during the year | < $10,000 | a reduced amount |
| married filing separately, and you lived with your spouse at any time during the year | > $10,000 | zero |
| single, head of household, or married filing separately, and you did not live with your spouse at any time during the year | < $138,000 | up to the limit |
| single, head of household, or married filing separately, and you did not live with your spouse at any time during the year | > $138,000 but < $153,000 | a reduced amount |
| single, head of household, or married filing separately, and you did not live with your spouse at any time during the year | > $153,000 | zero |
Amount of Roth IRA Contributions That You Can Make For 2023
Starting in 2025, catch-up contribution limits for retirement plans such as 401(k)s and IRA accounts will increase from $7,500 per year to $10,000.
According to NerdWallet, the limit will be indexed for inflation in 2024.
Get expert financial advice
Roth IRAs have significant benefits over traditional IRAs and 401(k)s for some investors.
Younger investors like Roth IRAs because of their flexible tax- and penalty-free withdrawal options. This explains why more and more young people are opting for this approach to retirement planning.
For expert financial advice around retirement planning, Unbiased will match you with an SEC-regulated financial advisor that suits your needs.
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