Do Required Minimum Distributions Matter? The Effect of the 2009 Holiday On Retirement Plan Distributions

Jeffrey Brown, James Poterba and David Richardson

No 20464, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper investigates how the 2009 one-time suspension of the Required Minimum Distribution (RMD) rules associated with qualified retirement plans affected plan distributions at TIAA-CREF, a large retirement services provider. Using panel data on retirement plan participants at TIAA-CREF, we find that roughly one third of those who were affected by minimum distribution rules discontinued their distributions in 2009. The results also show relatively small differences in the suspension probability between those who had 2008 distributions equal to the RMD amount, and might be classified as facing a binding RMD constraint, and those who were taking distributions in excess of the RMD amount before the distribution holiday. The probability of suspension declines substantially with age and rises modestly with economic resources. We find that individuals taking monthly distributions are less likely to suspend distributions than those taking annual distributions, particularly at higher wealth levels. This pattern is consistent with those who choose monthly distributions being more likely to use their distributions to finance consumption. We supplement these results based on administrative record data on retirement plan participants with survey evidence on participant attitudes that affected decisions about suspending distributions. Our findings provide guidance on the revenue consequences of changing RMD rules and offer insights about the role of various behavioral considerations, such as inertia, in modeling distribution behavior.

JEL-codes: H2 J14 J26 (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-age and nep-lab
Note: AG PE
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Published as Jeffrey R. Brown & James Poterba & David P. Richardson, 2016. "Do Required Minimum Distribution Rules Matter? The Effect of the 2009 Holiday on Retirement Plan Distributions," Journal of Public Economics, .
Published as Do Required Minimum Distribution Rules Matter? The Effect of the 2009 Holiday on Retirement Plan Distributions , Jeffrey Brown, James Poterba, David P. Richardson. in Personal Income Taxation and Household Behavior (TAPES) , Gordon and Keuschnigg. 2016

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