Most of an IRA’s money comes from 401(k) rollovers, not contributions

The assets in an individual retirement account seem small compared to the assets in a 401(k) plan.

At the end of 2025, IRAs held about $19.2 trillion, compared to 401(k) holdings of $10.1 trillion, according to the Investment Company Institute, an industry group representing asset managers.

However, relatively few people contribute funds directly to an IRA. Also, the annual savings limit is much lower than the 401(k) limit.

Rather, IRAs are primarily repositories for “rollovers” from workplace retirement plans, experts said. In other words, it collects funds that originate in a 401(k) or similar plan but are subsequently moved by the investor at a legally specified time, such as when the investor changes jobs or retires.

Nearly 6 million people will transfer funds to IRAs in 2023, up from about 4 million in the early 2000s, according to the latest IRS data.

Investors put $682 billion into IRAs in 2023, more than triple the amount in the early 1980s. By contrast, only $89 billion was contributed directly to IRAs in 2023.

“People generally don’t save any money in their IRAs,” says David Blanchett, a certified financial planner and director of retirement research at Prudential Financial. “All of the IRA funds come from rollovers.”

Experts say the decision to rollover is probably one of the most important financial choices many households will make, often costing hundreds of thousands of dollars or more.

Market research firm Cerulli Associates predicts investors will roll back more than $941 billion into IRAs in 2026 and about $1.3 trillion in 2031.

The growth came as the financial industry defeated Biden-era investor protection rules in federal court. The Trump administration has refused to continue defending rules that seek to raise standards for investment advice for insurance agents and others who solicit rollovers from retirement savers.

Experts say demographics play the biggest role in the growth in rollover assets.

Baby boomers are reaching traditional retirement age at a historic pace. According to the Alliance for Lifetime Income, an insurance industry trade group, more than 11,000 Americans turn 65 every day, or more than 4 million people a year.

Experts say many investors choose to roll funds from workplace plans into IRAs during retirement.

Philip Chao, CFP, founder and chief investment officer of Cabin John, Maryland-based Experiential Wealth, said this is partly down to psychology, as workers who leave their employers no longer want to keep their assets in a company 401(k). Investors may want to consolidate their financial accounts in one place, he said.

Traditional (pre-tax) IRAs gained about $5.2 trillion in total assets from 2020 to 2025, Cerulli said. Of that amount, rollovers accounted for $3.8 trillion, with contributions adding just $119 billion.

Of the remainder, market gains added $3.9 trillion, while investors withdrew about $2.5 trillion.

Experts say rollovers aren’t necessarily for everyone.

In fact, many Americans would generally be better off if they kept at least some of their money in a 401(k) plan during retirement, Blanchett said. That’s because they generally have access to investments and certain services at “very competitive” prices compared to IRAs.

Blanchett said that once an investor moves money from a 401(k) to an IRA, it’s impossible to move it back.

Additionally, investors generally have greater legal protections in 401(k) plans, Chao said.

Employers have a legal obligation, known as a “fiduciary” duty, to look out for the best interests of workers who participate in their company’s retirement plan.

But depending on the scenario, the same obligation may not exist outside of a 401(k) plan, experts say. Some observers are concerned that this could lead some financial salespeople to recommend rollovers when it is not in the best interest of investors.

“So many people fall victim to overzealous salespeople,” Chao says.

But experts say an IRA may make more sense in other scenarios.

For example, not all companies or 401(k) administrators allow flexible withdrawals from 401(k)s, making it difficult to withdraw funds from such retirement plans on an ad hoc basis, experts said.