According to the Investment Company Institute, IRA assets were $5.1 trillion by mid-year 2012, accounting for 28 percent of U.S. retirement assets.
"Despite the growth in IRA rollovers, very little is known about how the distribution process of 401(k) plan savings came to be centered on rolling savings into an IRA," the agency wrote to the Senate. "Our past work has highlighted concern that 401(k) plan participants may be encouraged to roll over plan balances to IRAs without understanding or considering other options."
Created by the Employee Retirement Income Security Act of 1974, the GAO said IRAs were established for two purposes. First, they provide a way for individuals not covered by a pension plan to save for retirement. Second, the GAO said they give retiring workers or those changing jobs "a way to preserve assets from employer-sponsored retirement plans by allowing them to roll over, or transfer, plan balances into IRAs."
The Taxpayer Relief Act of 1997 created the Roth IRA, which allows individuals to make contributions that are not tax-deductible. After five years, distributions made after age 59½ are not subject to income tax -- beyond what was already paid on contributions, the GAO said.