Most IRA money comes from 401(k) rollovers, not contributions
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Individual retirement account assets are dwarfed by 401(k) plans.
IRAs held about At the end of 2025, 401(k)s held $10.1 trillion, compared with $19.2 trillion, according to the Investment Company Institute, a trade group that represents asset managers.
But relatively few people contribute money directly to IRAs. Annual savings limits are much lower than 401(k)s.
Instead, IRAs are largely “transferors“From workplace retirement plans,” experts said. In other words, they receive money that originates from 401(k)s and similar plans, but that investors then move at a legally designated time, such as when they change jobs or retire.
The number of people has increased from about 4 million in the early 2000s to about 6 million in 2023, according to the latest IRS data.
Investors poured $682 billion into IRAs in 2023; This is more than three times the initial figure. In comparison, they made only $89 billion in direct IRA contributions in 2023.
“People are not saving in IRAs in general,” said David Blanchett, certified financial planner and head of retirement research at Prudential Financial. “All the money in IRAs comes from rollovers.”
Rollover decisions are perhaps one of the most important financial choices most households will make, often involving hundreds of thousands of dollars or more, experts said.
Cerulli Associates, a market research firm, estimates that investors will transfer over $941 billion into IRAs in 2026 and nearly $1.3 trillion in 2031.
This growth comes as the financial industry defeats a Biden-era investor protection rule in federal court. The Trump administration has declined to continue defending the rule, which aims to raise investment advice standards for insurance agents and others who solicit carryover amounts from retirement savers.
Why have rollovers from 401(k) plans to IRAs increased?
Experts said that the biggest role in the growth of transferred assets is played by demographics.
Baby boomers are entering traditional retirement age at a historic pace. More than 11,000 Americans a day — more than 4 million a year — turn 65, according to the insurance industry trade group Alliance for Lifetime Income.
Many investors choose to move their money from a workplace plan to an IRA after retirement, experts said.
This can be attributed in part to psychology, because workers who retire from an employer no longer want to park their assets in a 401(k), said Philip Chao, CFP, founder and chief investment officer of Experiential Wealth, based in Cabin John, Maryland. Investors may want to consolidate their financial accounts in one place, he said.
Traditional, or pre-tax, IRAs generated approximately $5.2 trillion in total assets from 2020 to 2025, according to Cerulli. It was stated that while 3.8 trillion dollars of this amount was made up of transfers, only 119 billion dollars of the contributions were made up.
In the remainder, investors withdrew about $2.5 trillion while market appreciation added $3.9 trillion.
Pros and cons of rollover
Experts said rollovers are not suitable for everyone.
In fact, many Americans would be better off after retirement if they kept at least some of their money in 401(k) plans, Blanchett said, because they would be able to access investments in general and certain services at “very competitive” prices than IRAs.
Once investors move their money from a 401(k) to an IRA, there’s no way they can go back, Blanchett said.
Additionally, investors generally have more legal protections in a 401(k) plan, Chao said.
Employers have a legal obligation, known as a “fiduciary” duty, to serve the best interests of workers participating in their company’s retirement plan.
But depending on the scenario, the same role may not be available outside the context of a 401(k) plan, experts said. Some observers worry that this has led some financial salespeople to recommend transferring when it is not in investors’ best interest.
“Many people fall victim to overzealous salespeople,” Chao said.
But experts said IRAs might make more sense in other scenarios.
For example, not all companies or 401(k) managers This arrangement allows for flexible withdrawals from 401(k), making it difficult to temporarily withdraw money from such retirement plans, experts said.
