Why Social Security Remains the Main Source of Income for Most Retirees Instead of IRAs

Daniel Liberto

Sat, October 3, 2026 at 3:05 PM EDT

While not everyone uses an IRA, they are still a massive part of the American retirement landscape.Credit: andreswd / Getty Images — *While not everyone uses an IRA, they are still a massive part of the American retirement landscape.*
*Credit: andreswd / Getty Images*

Key Takeaways

A majority of retirees rely on Social Security for income, while just over half draw from an IRA.
IRAs represent the biggest share of U.S. retirement assets, but many use these accounts to supplement—not replace—income.
Most IRA holders wait years to tap their accounts, often delaying withdrawals until required distributions begin.

Ask almost any expert how to achieve financial self-sufficiency in retirement and a commonly recommended strategy is to max out your IRA.

But when retirees report where their income actually comes from, these accounts rank fourth — behind Social Security, personal savings, and pensions.

About Half of Retirees Use IRAs—While Nearly All Depend on Social Security

More than nine in 10 retirees rely on Social Security as an income source, according to the 2026 EBRI/Greenwald Retirement Confidence Survey. Meanwhile, just over half draw from an IRA, with additional sources like personal savings and pensions also playing a role.

In other words, nearly half of retirees don’t have any IRA income coming in. IRA usage is trending down, too. Last year, 59% of respondents reported it as an income source, compared with 56% in the 2026 survey. This suggests the role of these accounts in retirement is softening.

There’s also an interesting gap between expectation and reality. According to the same EBRI/Greenwald survey, 71% of workers expected IRAs to be part of their retirement income, yet only 54% of retirees reported actually drawing from one.

Part of what makes Social Security so dominant is how little it asks of retirees. Unlike an IRA or workplace account, your Social Security benefits require no savings discipline and no investment decisions. Money is invested for you, and afterward, the checks or direct deposit just keep showing up.

Why This Matters

Knowing what retirement really looks like for most Americans is the first step to building a plan that holds up.

IRAs Hold Almost $20 Trillion—But Play a Supporting Role

While not everyone uses an IRA, they are still a massive part of the American retirement landscape. At the end of 2025, U.S. retirement market assets totaled $49.1 trillion—and IRAs claimed the biggest share at $19.2 trillion, according to the 2026 ICI Investment Company Fact Book.

Retirement income has traditionally been described as a three-legged stool, consisting of Social Security, a pension, and personal savings.

The ICI Fact Book argues that a five-layer pyramid is a better metaphor. Social Security forms the base, with nearly everyone receiving it, followed by homeownership and workplace retirement plans. IRAs sit higher up the pyramid, with other assets at the top.

Unlike the legs of a stool, the various layers of the pyramid aren’t equally sized for every individual.

For instance, Social Security replaces 91% of lifetime earnings for very low earners, but for the highest earners, it provides just 32%. The higher the earnings you’re looking to replace, the more your upper layers will need to fill in the gap. Put another way, IRAs generally matter most to those who need Social Security the least.

That could help explain the $19.2 trillion paradox. Only about 42% of U.S. households owned an IRA in 2025, suggesting the trillions in IRA assets are concentrated rather than evenly spread across the population.

This point is further underscored by a median IRA balance of around $150,000 as of 2022. That’s a meaningful sum, but modest enough to suggest the trillions are driven by a relatively small number of very large accounts.

How Retirees Actually Use IRAs Over Time

Run the median IRA balance of $150,000 through the widely cited 4% withdrawal rule, and it translates to only about $6,000 in annual income. For context, the average Social Security retirement benefit in 2025 was roughly $1,976 per month—or about $23,712 per year.

Most IRA owners seemingly aren’t desperate for this money anyway, as data show they often don’t tap into their accounts until the IRS forces them. At age 59, the year withdrawals first become penalty-free (at age 59-1/2), only 9.5% of IRA owners took a distribution. That share climbs slowly, reaching just 29.6% at age 72. Then, at 73—when required minimum distributions kick in for most current retirees—it spikes to 76.9%.

Roth IRA owners, who face no RMDs during their lifetime, frequently leave their accounts untouched even longer.

The takeaway isn’t that IRAs don’t matter. They serve an important purpose in generating an often much-needed extra income stream. However, for most retirees, they aren’t the foundation. In the typical American household, IRAs arrive late, pay out little, and fill in around the edges of a budget anchored by Social Security.

Read the original article on Investopedia

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