updated 1/27/2008 7:12:35 PM ET 2008-01-28T00:12:35

Americans who have money stored in Individual Retirement Accounts tend to hang on to it for use in the later years of their retirement, according to a study being released Monday.

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The Investment Company Institute, a Washington, D.C.-based trade association, found that less than one-fifth of households with IRAs made withdrawals from their accounts in tax year 2006, with the typical withdrawal averaging about 6 percent of the balance.

Asked about future withdrawals, seven in 10 of those surveyed said "it is unlikely they will take withdrawals prior to age 70 1/2," the study found.

Sarah Holden, the ICI's senior director for retirement and investor research, noted that the rules governing IRAs, which are tax-deferred savings accounts, discourage early withdrawals.

Savers who withdraw funds before age 59 1/2 are subject to a 10 percent penalty; savers older than 59 1/2 but younger than 70 1/2 may take withdrawals without penalty. But once they reach 70 1/2, the law mandates "required minimum distributions" based on IRS tables.

"In this survey, among those making withdrawals, the most cited reason was the required minimum distribution," Holden said.

She said that other studies have found that people want to hang on to their IRA money as long as possible to preserve the tax advantages.

"They want to keep it in the market and have it appreciate, with the earnings accruing tax-deferred," Holden said. "They appreciate that feature of the IRA."

She said older Americans also see their IRA balances as "money for emergencies."

The latest ICI study found that 40 percent of all U.S. households, or 46 million, have money in IRAs with assets totaling $4.6 trillion in mid-2007.

Most have traditional IRAs, which can be funded with pretax dollars, but a growing number are investing in Roth IRAs, which don't get the upfront tax break but grow tax-free forever.

The study said 37.7 million households have traditional IRAs, 9.2 million have company-sponsored IRAs like SIMPLE IRAs, and 17.3 million have Roth IRAs. Households may own more than one type of IRA.

The greatest growth has come from assets rolled over into IRAs from employer-sponsored accounts like 401(k)s, the study said. In tax year 2006, just 14 percent of U.S. households made contributions directly to IRAs, it said.

Holden said the lower contribution levels may reflect the complexity of rules governing who is eligible for a tax deduction on IRA contributions. At the same time, employer-sponsored 401(k)s and other retirement accounts have become increasingly popular and allow higher contributions, she added.

In 2007, for example, the limit on 401(k) contributions was $15,500; people 50 and over could make an additional $5,000 "catch-up" contribution. The IRA limit was $4,000 with a $1,000 catch-up provision. That rises to $5,000 this year, with a $1,000 catch-up provision.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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