The Shocking Number of Americans Without a Retirement Account

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Retirement accounts come with big benefits. If you have a 401(k), IRA, or other tax-advantaged retirement account, you can get tax breaks that make it easier to build a retirement nest egg. These tax breaks can be quite valuable and are available even without itemizing your deductions, so they can be claimed by most anyone.

Unfortunately, not everyone has access to a retirement account or the benefits these accounts offer. In fact, recent research from the Aspen Institute suggests the majority of Americans don't have one. This is shocking news, and it's a big problem if you're one of those Americans going without. The good news is, opening a retirement savings account is pretty easy, so if you don't already have one, you can open one today.

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How many Americans don't have a retirement account?

According to the Aspen Institute, close to 6 in 10 working-age Americans do not have a retirement account. Sadly, the Aspen Institute also warns that things are likely to get worse due to the changing nature of work.

As more Americans freelance or become part of the gig economy, traditional workplace benefits such as access to a 401(k) will become less common. This will leave working-age Americans on their own to figure out how to save enough for retirement and take advantage of tax breaks that help them build a big nest egg more easily.

How can you open a retirement account?

If you don't currently have a retirement account, today is the day to get one. Fortunately, this process doesn't have to be very hard -- you just have to follow these steps:

  • Ask HR if you have a retirement plan at work. Most often, this will be a 401(k) or a 403(b), but depending where you work, it could also be a SEP or Simple IRA. If you have access to a workplace plan, this is often the easiest account in which to enroll. You can get the paperwork from HR (or, more commonly, the online login) and open an account with the administrator your employer has chosen. All you'll have to do then is decide how much money you want to contribute from each paycheck and the funds will be taken out automatically and moved over to your account.
  • Research other account types. If you don't have access to a workplace retirement account, you can still invest in a retirement account on your own. For most people, you'll need to choose between a traditional IRA and a Roth IRA. Traditional IRAs allow you to make tax-deductible contributions, while Roth IRAs are contributed to with after-tax money but you're able to make withdrawals tax-free during retirement. If you suspect your tax rate is higher now than it will be when you're retired, you're probably better off contributing to a traditional IRA than a Roth. There are also other types of retirement accounts for the self-employed, which may have higher limits for tax-deductible contributions -- but these are open to you only if you have income that's not from traditional wages.
  • Choose a brokerage firm or financial institution. You can open an IRA with pretty much any broker. Some banks and credit unions also allow you to open an IRA, as do robo-advisors and financial institutions offering nontraditional investment options, such as peer-to-peer lenders. When you're deciding where to open your IRA, consider whether you have to pay a fee for the account; what the commissions are for buying and selling assets in your account; if there's a minimum to open the account; and the types of assets in which you can invest. Ideally, you'll pick a broker with no fees; low commissions; no minimum balance requirement or a low requirement; and a mix of stocks, bonds, ETFs, and mutual funds you can invest in.
  • Open your account. You can probably do this online. You'll need to provide basic details including your Social Security number and other financial information. It typically takes just a few minutes to open the account.

Once you have your account open, you can start making contributions. Just be aware there are annual limits on how large your tax-deductible contributions can be to 401(k)s and IRAs, and you may not be able to deduct IRA contributions if your income is too high and either you or your spouse has access to a retirement plan at work. And, remember, after you've opened the account, you still need to invest the money. While robo-advisors automatically invest for you after you answer a few simple questions, in other types of accounts you'll have to pick your mix of investments and buy them. If you're not sure where to get started, check out some model portfolios or this guide to investing for the first time.

Open your retirement account today

Now you know how to open a retirement account so you can become one of the minority of working-age Americans taking advantage of a powerful tool to invest for your future. By not delaying and following these simple steps, you'll be able to get your account open quickly and invest for a secure retirement.

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