Both participation and contributions generally were higher among older age groups, according to two new reports from the Congressional Research Service (CRS).
The CRS says it issued the reports, on contributions to defined contribution plans and individual retirement accounts, in response to congressional interest in data on contributions because of two factors:
- tax expenditures for retirement plans (estimated to be $153.6 billion for DC plans and $23.8 billion for IRAs in FY2020) are one of the largest categories of revenue losses attributable to provisions in the tax code; and
- recent legislation has included provisions that would modify contribution limits for certain individuals.
DC Plans
The CRS reports that in 2018, approximately 60 million taxpayers contributed to DC plans, which amounted to 41.7% of all taxpayers with wage income. In addition:
- the average contribution to DC plans was $5,510;
- more than 8% of taxpayers who contributed to DC plans in 2018 contributed the maximum amount;
- the percentage of contributing taxpayers who contributed the maximum amount permitted increased by age group—2.1% of contributing taxpayers under age 35 contributed the maximum, compared to 15.9% of contributing taxpayers age 65 and older; and
- about half of taxpayers with wage income age 35-65 made elective deferrals.
DC plan participation and contributions by participants were more sizable for older people than for their younger counterparts. A higher percentage of those age 45-55—50.7%—contributed to DC plans in 2018 than did other age groups. Contributions were highest for those age 55-65, averaging $7,669. And the percentage of participants making the maximum contribution possible was highest for those age 65 and older; 15.9% of them did so.
IRAs
Traditional IRAs. The CRS reports that in 2018, approximately 4.4 million taxpayers contributed to traditional IRAs. In addition:
- the average contribution was $4,198;
- more than 50% of individuals who made contributions to their traditional IRAs contributed the maximum amount; and
- between 5% and 6% of taxpayers age 50 and older made catch-up contributions of less than the $1,000 maximum.
Participation and contributions by participants in traditional IRAs were more sizable for older people than for their younger counterparts. The number of taxpayers age 50-65 who contributed to traditional IRAs in 2018 was higher than among other age groups; 2,086,543 of them did so. Average contributions were highest for those age 65-70½, amounting to $4,853. And the percentage of participants making the maximum contribution possible—57.5% —was highest for those age 65-70½.
Roth IRAs. The CRS reports that in 2018, more than 7 million taxpayers contributed to Roth IRAs. In addition:
- the average contribution was $3,408;
- more than one-third of taxpayers who contributed to Roth IRAs in 2018 contributed the maximum amount; and
- between 7% and 10% of taxpayers age 50 and older made catch-up contributions of less than the $1,000 maximum.
Participation and contributions by participants in traditional varied by age. The number of taxpayers age 35-50 who contributed to Roth IRAs in 2018—2,287,494—was higher than among other age groups. Average contributions were highest for those age 65 and older, amounting to $4,744. And the percentage of participants making the maximum contribution possible was highest for those age 65 and older; 50.9% of them did so.
