Most Americans build retirement savings through workplace plans like 401(k)s. But thanks largely to rollovers, IRAs now hold more total retirement assets than 401(k)s do.

All told, IRAs hold approximately $19.2 trillion (1), about equal to Europe's total gross domestic product, through 2025. In contrast, 401(K) plans total $10.1 billion (2) in the same time period.

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Why the disparity? For starters, workplace retirement plan managers often use IRAs as a parking spot for rollovers when career changes or retirements trigger account transfers. LIMRA estimates (3) roughly $855 billion was rolled over from workplace retirement plans into IRAs in 2025 alone, with annual rollover activity projected to exceed $1 trillion by 2030.

Yet there are other reasons why Americans shun IRAs, and it's a longer list than you may think. Here's a snapshot.

"First, many Americans don't have the saving capacity to contribute to both a workplace retirement plan and an IRA," Jason Dall'Acqua, founder and financial advisor at Crest Wealth Advisors, told Moneywise. "A workplace plan is typically going to be the first place they save."

Additionally, Roth IRAs have income limits, as do traditional IRAs for individuals with access to a workplace retirement plan. "That limits access to those who may have the cash flow to utilize these accounts," Dall'Acqua noted.

There's also a lack of financial education in the country since retirement plan vehicles largely aren't taught in U.S. schools. "So, many people may not be aware of the savings options available to them, and the pros and cons of each option," Dall'Acqua added.

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There are understandable reasons why Americans also lean toward 401(k) plans.

"Two compelling arguments to keep funds within a 401(k) would be the Rule of 55 and the ability to borrow against the account," Adam Vega, managing partner at Avance Private Wealth Management, told Moneywise.

For example, someone who retires from a company with an employer 401(k) has the ability to take distributions as early as 55, compared to 59.5 for IRAs — penalty free. "For someone who plans to retire early, that is significant," Vega said. "We'll often suggest keeping funds in a 401(k) for this reason alone, just to offer that option."

Vega said that while his team rarely suggests taking loans from a 401(k), the ability to borrow funds against a 401(k) is a nice feature to have, as it's hard to predict what the future holds. "Rolling funds out early, you completely lose that ability assuming you plan to remain employed," he added.

Other investing experts agree, adding that consumers choose 401(k) plans over IRAs for operational reasons.

"Most Americans save for retirement through employer-sponsored 401(k) plans, which offer automatic payroll deductions, employer matching contributions, and often automatic enrollment," Colleen Carmitchel, tax advisor and financial planner at Moneta, told Moneywise.

In contrast, Carmitchel said IRAs require individuals to proactively make contributions each year, and their annual contribution limits are significantly lower than those for 401(k) plans. "As a result, many Americans view IRAs as a supplemental retirement savings vehicle or a destination for rollover assets rather than a primary retirement savings account," she added.

Having carved a huge role in the retirement plan rollover market, IRAs will play a key long-term savings role for Americans, but savers should know a few things about IRAs first.

"As IRA rollover activity continues to grow, ensuring that recommendations are made in the investor's best interest is increasingly important," Carmitchel said.

For instance, before transferring retirement assets, investors should ask how their advisor is compensated, request a side-by-side comparison of fees, investment options, and services, and understand why a rollover is recommended rather than leaving assets in the existing plan. "Working with a fiduciary advisor and carefully evaluating the costs, protections, and benefits of each option can help reduce the risk of conflicted advice and lead to better long-term outcomes," Carmitchel advised.

Future changes to federal retirement policy could also make IRAs more attractive as primary savings vehicles rather than simply destinations for rollover assets. Financial planners say reforms that make it easier to contribute to IRAs through payroll deductions, raise contribution limits or simplify eligibility rules could encourage more Americans to use them regularly.

"The most impactful reforms would make IRA contributions as simple and automatic as saving through a workplace retirement plan," Carmitchel said. "Allowing payroll deductions into IRAs, increasing contribution limits, and simplifying eligibility and contribution rules would encourage greater participation."

Carmitchel also said Congress could encourage more IRA participation by expanding tax incentives. One example would be strengthening the Saver's Credit by replacing it with or supplementing it with a direct government matching contribution for lower-income workers. "Doing so could further encourage Americans to use IRAs as active retirement savings vehicles rather than primarily as rollover accounts," she added.

Meanwhile, leaving assets in a former employer's 401(k) can be the better long-term strategy for investors, particularly when the plan offers low-cost institutional investment options, strong fiduciary oversight, and lower overall expenses than comparable IRA investments.

"A 401(k) may also provide stronger federal creditor protections under ERISA, preserve access to features such as the age 55 penalty-free withdrawal rule, or include investment options that are not available in IRAs," Carmitchel noted.

Rather than automatically rolling assets into an IRA, "investors should compare the costs, investment choices, legal protections, and plan features to determine which option best supports their long-term financial goals," she advised.

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Ici Factbook (1); Yahoo Finance (2); LIMRA (3)

This article originally appeared on Moneywise.com under the title: IRAs hold trillions more than 401(k) plans — so why do so few Americans actually contribute to them?

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