Glossary · Investing and personal finance
Retirement account
A retirement account is a savings account with tax breaks, such as a 401(k) or an IRA in the US, meant for money you will use after you stop working.
Also called: 401(k), IRA, Roth IRA, individual retirement account
In 2025, Survey of Consumer Finances. In 1989: 37%.
US households, Q2 2026: about 8% of their net worth.
In plain words
Governments want people to save for old age, so they offer a deal: put money in a special account and the tax on it is delayed or cancelled, as long as you leave it there until retirement. That special account is a retirement account.
In the US the two big kinds are the 401(k), offered by employers and named after a section of the tax code, and the IRA, the individual retirement account that anyone with earned income can open. In a traditional account you skip the tax on the money going in and pay it when you take it out; in a Roth account you pay the tax now and take the money out tax-free in retirement.
Many employers add a match: for example, 50 cents for every dollar you put in, up to a limit. In 2025, 55% of US families had some kind of retirement account.
Example
What an employer match is worth
You earn $50,000, and your employer matches 50% of what you put into your 401(k), up to 6% of your salary.
- You put in 6%: $3,000 a year.
- Your employer adds half of that: $1,500, an instant 50% on your money.
- In a traditional 401(k) your $3,000 is not taxed this year: at a 22% tax rate it costs you only $2,340 of take-home pay.
- $4,500 a year for 30 years, growing at 7% a year, becomes about $425,000.
The tax is paid when the money comes out in retirement. Limits, rules and tax rates change, so check the current ones.
One level deeper
Tax deferral means compounding on more money. In an ordinary account, interest, dividends and gains are taxed along the way, which shaves the yearly return; inside a retirement account the whole return compounds until it is taken out. Over decades the difference adds up.
The price is less freedom. Under US rules as of 2026, taking money out of a 401(k) or a traditional IRA before age 59½ usually costs a 10% penalty on top of income tax, with some exceptions, and traditional accounts eventually require minimum withdrawals. Contribution limits are set by law and change most years.
Workplace plans have largely replaced traditional pensions in private companies. A pension (a defined-benefit plan) promises a set income; a 401(k) (a defined-contribution plan) promises nothing: what you get depends on what was paid in and how the investments did. US households held about $14.3T in defined-contribution plans in Q2 2026.
Share of US families with a retirement account
Every three years the Federal Reserve’s Survey of Consumer Finances asks families what they own. The share with an IRA, a 401(k) or a similar account rose from 37% in 1989 to 55% in 2025.
The numbers behind the chart
| Date | Families with a retirement account |
|---|---|
| 1989 | 37% |
| 1992 | 40% |
| 1995 | 45% |
| 1998 | 49% |
| 2001 | 53% |
| 2004 | 50% |
| 2007 | 53% |
| 2010 | 50% |
| 2013 | 49% |
| 2016 | 52% |
| 2019 | 50% |
| 2022 | 54% |
| 2025 | 55% |
Why it matters
For many workers, the employer match is the largest sure return available anywhere: 50% or 100% on the money put in.
Automatic payroll contributions turn saving into a habit, which is half the battle.
Retirement money moves markets: target-date and index funds held in 401(k)s now own a large slice of US companies.
A common mistake
Myth: A 401(k) is an investment.
In fact: It is a container with tax rules. What it earns depends on what you choose inside it: stock funds, bond funds, target-date funds or cash. Money left in cash inside a 401(k) grows like cash.
Questions people ask
What is the difference between a 401(k) and an IRA?
A 401(k) is offered by an employer, often with a match, and has higher contribution limits; an IRA is opened by you at a bank or broker. Both come in traditional and Roth versions, and many people have both.
Traditional or Roth: what is the difference?
Traditional: no tax on the money going in, income tax on everything coming out. Roth: tax now, nothing later if the rules are followed. The traditional version tends to come out ahead if your tax rate in retirement will be lower than now, the Roth if it will be higher.
How many Americans have a retirement account?
55% of US families in 2025, according to the Fed’s Survey of Consumer Finances: 49% of families headed by someone under 35 and 63% of those aged 55 to 64.
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About the numbers
- The numbers on this page are recalculated from the data every night; the sources are listed at the end of the page.
- US households by age of the head: Board of Governors of the Federal Reserve System, Distributional Financial Accounts of the United States (DFA), levels by age.
- US families owning stock (Survey of Consumer Finances): Board of Governors of the Federal Reserve System, Survey of Consumer Finances, historical tables based on public data (nominal), Tables 6 and 7.
- This page explains a term. It is not investment advice.