The Relationship between Required Minimum Distributions and Mortality

Financial well-being and mortality are highly correlated. Wealthier individuals live longer than their less-wealthy peers. Individuals who experience a negative wealth shock in middle or old age have a significantly higher risk of death in the following 20 years than their peers with stable wealth. Higher incomes are associated with greater longevity. Individuals who are sick during their working years have lower lifetime earnings (and less retirement savings) and are therefore less able to obtain life-extending health care. Recently, Fitzpatrick and Moore (2018) showed that male mortality increases by two percent immediately at age 62, the earliest age that individuals can claim their Social Security benefits.
We build on this literature, and particularly on Fitzpatrick and Moore (2018), by studying whether – and to what extent – defined contribution (DC) retirement plan access causally affects the mortality of plan participants. We study required minimum distributions (RMDs) from individual retirement accounts (IRAs) and certain other DC accounts; RMD effective dates are determined by month and day of birth. Internal Revenue Service (IRS) and Thrift Savings Plan (TSP) rules require individuals to initiate RMDs or full withdrawals from DC account(s) beginning on April 1st in the year after the year they turn 70 ½ years old. If they fail to do so, they must pay a 50% penalty on taxable balances.