TY - JOUR AU - Poterba,James M. AU - Venti,Steven F. AU - Wise,David A. TI - The Drawdown of Personal Retirement Assets JF - National Bureau of Economic Research Working Paper Series VL - No. 16675 PY - 2011 Y2 - January 2011 UR - http://www.nber.org/papers/w16675 L1 - http://www.nber.org/papers/w16675.pdf N1 - Author contact info: James M. Poterba Department of Economics MIT, E52-350 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-6673 Fax: 617/258-7804 E-Mail: poterba@nber.org Steven F. Venti Department of Economics 6106 Rockefeller Center Dartmouth College Hanover, NH 03755 Tel: 603/646-2526 Fax: 603/646-2122 E-Mail: steven.f.venti@dartmouth.edu David A. Wise NBER 1050 Massachusetts Avenue Cambridge, MA 02138 E-Mail: dwise@nber.org M2 - featured in NBER digest on 2011-06-01 AB - How households draw down their balances in personal retirement accounts (PRAs) such as 401(k) plans and IRAs can have an important effect on retirement income security and on federal income tax revenues. This paper examines the withdrawal behavior of retirement-age households in the SIPP and finds a modest rate of withdrawals prior to the age of 70½, the age at which required minimum distributions (RMDs) must begin. In a typical year, only seven percent of PRA-owning households between the ages of 60 and 69 take an annual distribution of more than ten percent of their PRA balance, and only eighteen percent make any withdrawals at all. For these households, annual withdrawals represent about two percent of account balances. The rate of distributions rises sharply after age 70½, with annual withdrawals of about five percent per year. During the period we study, the average rate of return on account balances exceeded this withdrawal rate, so average PRA balances continued to grow through at least age 85. Our findings suggest that households tend to preserve PRA assets, perhaps to self-insure against large and uncertain late-life expenses, and that RMD rules have important effects on withdrawal patterns. ER -