Younger Retirees Withdrawing IRA Funds Quicker

Younger retirees are withdrawing money from their IRAs at a faster rate than older households, according to a new report by the Employee Benefit Research Institute (EBRI).

EBRI discovered that Americans between the age of 61 and 70 are withdrawing money from IRAs in larger amounts (both in dollar amounts and percentage of account balances) than people required to take distributions. These younger retirees are not required under current tax rules to start taking required minimum distributions from IRAs like those age 70-and-a-half and older.

“As more and more Baby Boomers enter retirement with large portions of their retirement savings in IRAs, their financial security in retirement may well depend on how they manage these accounts post-retirement,” Sudipto Banerjee, EBRI research associate and author of the report, said in a statement. “Some may be overly cautious in drawing down their IRA balances, sacrificing a more enjoyable retirement, while others may spend too much too soon, jeopardizing their retirement security.”

IRA-withdrawal rates decrease for those ages 61 to 70 as income increases. Nearly half of those in the two lowest income quartile made IRA withdrawals. However just 28.8% of retired households in the top-income quartile made a withdrawal.

Furthermore, more of these younger households are spending most of their withdrawals, while a larger percent

age

of

those between the ages of

71 and 80 increased savings in CDs and similar holdings. Close to a third of older retirees put their withdrawals into savings like just 11% of younger retirees did so.

Younger retirees were much more likely to spend their withdrawals on special purchases (25.8% compared to 13.5% of older retirees); however, mostly they used the money for regular expenses (57.8%).

The data in this study comes from the University of Michigan’s Health and Retirement Study, sponsored by the National Institute on Aging.