HKS Faculty Research Working Paper Series
HKS Working Paper No. RWP11-006
January 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age--the percentage of balances withdrawn remains at about five percent.
Citation
Poterba, James M., Steven F. Venti, and David A. Wise. "The Drawdown of Personal Retirement Assets." HKS Faculty Research Working Paper Series and NBER Working Papers (RWP11-006 and 16675), January 2011.