The Drawdown of Personal Retirement Assets

James Poterba, Steven Venti and David Wise ()

Working Paper Series from Harvard University, John F. Kennedy School of Government

Abstract: How households draw down the balances that they accumulate in retirement saving accounts such as 401(k) plans and Individual Retirement Accounts can have an important effect on the contribution of these accounts to retirement income security. This paper presents evidence on the pattern of withdrawals at different ages. We find a relatively modest rate of withdrawals prior to the age at which households are required to take minimum required distributions. Only seven percent of PRA-owning households between the ages of 60 and 69 take annual distributions of more than ten percent of their PRA balance, and only 18 percent of PRA households in this age group make any withdrawals in a typical year. The rate of distributions rises sharply after age 70 1/2, when minimum distributions are required. The proportion of PRA-owning households making a withdrawal jumps to over 60 percent by age 71, and crosses 70 percent a few years later. On average, households age 60 to 69 with PRA accounts withdraw only about two percent of their account balances each year, considerably less than the rate of return on account balances during our sample period. Even at older ages--after the required minimum distribution age--the percentage of balances withdrawn remains at about five percent.

JEL-codes: D14 E21 H30 J14 (search for similar items in EconPapers)
Date: 2011-01
New Economics Papers: this item is included in nep-age
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Citations: View citations in EconPapers (10)

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Related works:
Working Paper: The Drawdown of Personal Retirement Assets (2011)
Working Paper: The Drawdown of Personal Retirement Assets (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:harjfk:rwp11-006

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