The Drawdown of Personal Retirement Assets

37 Pages Posted: 15 Mar 2011 Last revised: 16 Mar 2011

See all articles by James M. Poterba

James M. Poterba

National Bureau of Economic Research (NBER); Massachusetts Institute of Technology (MIT) - Department of Economics

Steven F. Venti

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

David A. Wise

National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Multiple version iconThere are 2 versions of this paper

Date Written: January 11, 2011

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 ½, 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 Even at older ages - after the required minimum distribution age - the percentage of balances withdrawn remains at about five percent.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 Classification: D14, E21, H30, J14

Suggested Citation

Poterba, James M. and Venti, Steven F. and Wise, David A., The Drawdown of Personal Retirement Assets (January 11, 2011). HKS Working Paper No. 11-006. Available at SSRN: https://ssrn.com/abstract=1785403 or http://dx.doi.org/10.2139/ssrn.1785403

James M. Poterba (Contact Author)

National Bureau of Economic Research (NBER) ( email )

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Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Steven F. Venti

Dartmouth College - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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David A. Wise

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Harvard University - Harvard Kennedy School (HKS)

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Cambridge, MA 02138
United States

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