Experts frequently advocate maximizing Individual Retirement Account (IRA) contributions for a financially secure retirement. However, when examining actual income sources for retirees, IRAs typically fall behind Social Security, personal savings, and traditional pensions. This reveals a disparity between recommended retirement planning and the real-world financial landscape for many Americans.
The Supplemental Role of IRAs in Retirement Income
In the vast majority of cases, over 90% of retirees rely on Social Security as a primary income stream, according to the 2026 EBRI/Greenwald Retirement Confidence Survey. In contrast, slightly more than half of retirees utilize IRAs, alongside other sources such as personal savings and pensions. This indicates that a significant portion of retirees do not draw income from IRAs, and their reliance on these accounts has seen a slight decline, with 56% reporting IRA usage in 2026 compared to 59% in the preceding year, suggesting a diminishing role for IRAs in retirement planning.
Furthermore, there’s a noticeable divergence between expectations and reality. The same survey found that 71% of active workers anticipate IRAs contributing to their retirement income, yet only 54% of retirees actually do so. Social Security’s widespread use is partly attributable to its low-effort nature, requiring no individual savings discipline or investment decisions; contributions are handled automatically, and benefits are consistently disbursed.
Despite not being a primary income source for all, IRAs form a considerable component of the American retirement savings landscape. By the close of 2025, U.S. retirement assets reached an impressive $49.1 trillion, with IRAs constituting the largest share at $19.2 trillion, as reported by the 2026 ICI Investment Company Fact Book. Traditionally, retirement income has been conceptualized as a "three-legged stool" comprising Social Security, pensions, and personal savings. However, the ICI Fact Book suggests a more nuanced five-layer pyramid model, where Social Security forms the broad base, followed by homeownership and workplace retirement plans, with IRAs occupying a higher, more specialized position. This pyramid illustrates that not all layers are equally substantial for every individual. For example, Social Security replaces a larger percentage of income for low earners (91%) compared to high earners (32%), implying that IRAs are more crucial for those less dependent on Social Security.
This might elucidate the apparent paradox of $19.2 trillion in IRA assets. In 2025, only about 42% of U.S. households owned an IRA, indicating a concentrated distribution of these assets. The median IRA balance of approximately $150,000 in 2022 further suggests that a relatively small number of very large accounts significantly inflate the total Trillions in IRA holdings.
An analysis of IRA withdrawals reveals that most owners do not access their funds until legally obligated. For instance, only 9.5% of IRA owners begin withdrawals at age 59½ (when penalties cease). This figure gradually rises to 29.6% by age 72, then sharply jumps to 76.9% at age 73, coinciding with the commencement of required minimum distributions (RMDs) for most retirees. Roth IRA holders, exempt from RMDs during their lifetime, often defer withdrawals even longer. This suggests that while IRAs are vital for generating supplementary income, they typically do not form the bedrock of most retirees' financial security. For the majority of American households, IRAs arrive as a later, smaller income stream, complementing a budget primarily anchored by Social Security benefits.
This insight underscores the importance of a comprehensive retirement strategy that recognizes the diverse roles of various income sources. While contributing to an IRA is undoubtedly beneficial, understanding its typical position within the broader retirement income framework can help individuals set more realistic expectations and plan more effectively. The data suggests that Social Security remains the unwavering foundation for most, with IRAs serving as a flexible and valuable, though often deferred, enhancement to overall financial well-being in later life.
