Ameritrade Survey Finds Many Investors Lack Knowledge of Retirement Accounts

Home » Money Management » Personal Finance » Ameritrade Survey Finds Many Investors Lack Knowledge of Retirement Accounts

Ameritrade Survey Finds Many Investors Lack Knowledge of Retirement Accounts

How much do you know about your retirement accounts? Even if you contribute to an employer-sponsored 401(k) or even a traditional IRA, chances are you still might not be familiar with all of the rules, requirements, or fees that come with them. To prove this point, recently Ameritrade interviewed 1,006 U.S. adults over the age of 22 with more than $10,000 in investable assets and tested their knowledge about various 401(k) and IRA topics.

Asked what the current annual 401(k) contribution limit was, only 19% of respondents selected the correct answer, $19,000. To be fair this figure does tend to change from year to year so the 12% that said $18,500 were just a year behind. However the top answer — “it depends on your income” — is decidedly incorrect. Interestingly nearly double the number of those surveyed (35%) identified $6,000 as the current annual contribution limit for traditional IRAs. But, once again, a quarter of people believed the limit was dependent on your income.

Elsewhere just over half (52%) of those surveyed knew that they could contribute to both a 401(k) and an IRA. However only 26% were aware that non-working spouses could also contribute to IRAs and 60% mistakenly thought that only those of a certain tax bracket could have a traditional IRA. It is possible that those who thought there were income limits for traditional IRAs were thinking of the income caps placed on tax-deductible IRA contributions or the similar restrictions for Roth IRAs.

Beyond these “pop quiz” type questions, the survey also discovered that the majority of those of with 401(k)s were unaware what they paid in fees. In fact two-thirds of respondents told Ameritrade that they were unable to say what fees their accounts incurred. Another intriguing question asked investors if they considered employer matching funds to be “free money.” What makes it interesting is that 43% disagreed with that interpretation.

To a certain degree, those who failed to correctly answer all Ameritrade’s quiz questions can be forgiven as what was being asked may not apply to their particular situation. That said, it’s always good for retirement savers to know about account contribution limits so they can strive to reach these caps when possible. Similarly, while they may not necessarily be able to control the fees assessed to their 401(k), having knowledge of these fees can help individuals decide the best course of action for the account after they leave their current employer. For these reasons, if you didn’t know some of these basics, it may be worth reading up about your various retirement accounts.

Comments

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Author

Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

Other Articles by Jonathan Dyer

Home Mortgage Applications Reached a Nine-Year High Last Week

Despite some parts of the country seeing snow this past week, make no mistake that it is officially spring. That means that, in addition to blooming trees and allergies, it's time for home sales to pick back up after the slower winter season. On that note it seems that the...

More Small Business Owners Turning to Online Lenders

When businesses are in need of a loan, where do they turn? Previously many may have said their local bank or another major institution. Although that's still often the case, the number of entrepreneurs looking to online lenders for funding continues to grow. A new study by Federal Reserve Banks...

Coinbase Launches Crypto Visa Debit Card (In the UK)

Back before cryptocurrencies became the gold rush of 2017, the intent was always to spend and use such assets like you would fiat currency. The problem was that only a handful of sites and physical stores accepted Bitcoin, with even fewer allowing for payments in other digital currencies. One proposed...