Most IRA Contributions Were Made by Middle-Class Taxpayers

Ted

FYI: New data released this week from the Internal Revenue Service on Individual Retirement Accounts (IRAs) most notably includes who contributed to IRAs and how much for tax year 2015. Taxpayers contributed nearly $40 billion to IRAs in 2015, indicating that tax-neutral savings accounts will continue to be an important source of capital income. Expanding and simplifying their structure would broadly benefit many Americans.
Regards,
Ted
https://taxfoundation.org/new-irs-data-shows-ira-contributions-made-middle-class-taxpayers/

msf

I see that the linkster is responding to comments about too many links by posting without including links. Sneaky

https://taxfoundation.org/new-irs-data-shows-ira-contributions-made-middle-class-taxpayers/

This is old news (dated April 26th), though it seems that Ritholtz just picked this up today.

The headline isn't clear whether it's counting dollars contributed or just contributions in any amount. It is the former - not quite 50% of the total dollars contributed to traditional and Roth IRAs in 2015 came from individuals with AGIs under $100K. (Though if an individual was married filing jointly, the IRS attributed the total combined income separately to each spouse.)

It's not a particularly meaningful statistic. There are relatively few wealthy taxpayers and their contributions are capped at $5500 or $6500. So it's virtually impossible for the amount of dollars they contribute to exceed that of many more small contributions by the middle class.

According to the IRS tables, at most 10,668,441 "taxpayers" contributed to either a traditional IRA or a Roth in 2015. The precise number is less, because this figure double counts those who contributed to both.

These 10M contributors are but a small fraction of the 157M taxpayers eligible to make IRA contributions. That's at best a 7% participation rate. So while "tax-neutral savings accounts will continue to be an important source of capital income", that seems to apply to just small minority, however one wants to characerize them.

Sources (IRS Excel tables): 157M eligible taxpayers, and contribution/AGI data

Old_Joe

It seems intuitive that for the relatively small "upper class" of wealthy taxpayers an IRA would be relatively unimportant as far as income potential, while those wage earners classified as "below the middle class" presumably need all of their income just to meet current expenses. That would seem to leave the "middle class" as the primary potential for IRA investment, so why is this a surprise?

msf

Exactly. The surprise is not that the middle class is the primary customer for IRAs, but that even among the middle class, so few contribute.

Mark

Being middle class these days isn't what it used to be.

Old_Joe

Not to worry- the present administration and Congress is on that.

Crash

Old_Joe said:

Not to worry- the present administration and Congress is on that.

Ya, let's hollow-out SS. The giant debt we created via the tax cut must be paid for, eh?
The poor must always help the rich to stay rich and get richer.
Hedges, the Nobel (correction: Pulitzer) winner for Journalism, knows a thing or two:
This presentation was given in Canada.
Near the start, he asserts: "You don't have to spend three years in Harvard divinity school to figure out that Jesus didn't come to make us rich." Yup. But this presentation is political, not religious.

Ted

@MFO Members Can you spell COMMUNIST ! Check out this anti-american from the following Wikipedia link.
Regards,
Ted
https://en.wikipedia.org/wiki/Chris_Hedges

Old_Joe

Yeah, yeah... a "COMMUNIST" is anyone who questions your particular societal viewpoint. You and Joe McCarthy.

Ted

@MFO Members: I think any reasonable person would come to the same conclusion if they read the Wikipedia Bio of this sick human being. Of course you have to be able to read, unlike the previous poster.
Regards,
Ted

hank

Mark said:

Being middle class these days isn't what it used to be.

Yeah - You don’t hear the term much anymore - for good reason.

Old_Joe

Another couple of commies!

Crash

And just for the record: Hedges is no communist. He's a socialist. And an ordained Presbyterian Minister. I guess the Nobel (correction: Pulitzer) folks thought he was worth the prize. Me, too. He was pushed out of the NYT for reporting too much of the truth. Lotsa folks are allergic to the truth, these days. The prophet Amos ran into them. A lot of the biblical prophets ran into them. A guy from Nazareth ran into them. They often are those with vested interests to protect.

hank

msf said:

It's not a particularly meaningful statistic. There are relatively few wealthy taxpayers and their contributions are capped at $5500 or $6500. So it's virtually impossible for the amount of dollars they contribute to exceed that of many more small contributions by the middle class.

That’s all correct. Thanks for the documentation. Notwithstanding those limitations, occassionally one of those folks just gets lucky. https://www.marketwatch.com/story/how-to-shelter-hundreds-of-millions-in-an-ira-account-2014-09-19

Crash

Uncle Mittens. I found a loophole. Who needs ethics? Empty suit. One of the parasitic un-dead.