Assessing Knowledge of Retirement Behavior by Panel on Retirement Income Modeling

Author:Panel on Retirement Income Modeling
Language: eng
Format: epub
Tags: Behavioral and Social Sciences : Aging. Behavioral and Social Sciences : Policy, Reviews and Evaluations
Publisher: NATIONAL ACADEMY PRESS
Published: 1996-07-05T00:00:00+00:00

Withdrawal Behavior

A third important issue concerning the saving effects of targeted retirement saving accounts, but one that has received little research attention to date, concerns the pattern of withdrawals from these accounts after households become eligible for penalty-free withdrawals at age 59-1/2. Preliminary evidence on the flow of withdrawals and the age and income pattern of their receipt is presented in Andrews (1991), Fernandez (1992), Yakoboski (1994), and Poterba, Venti, and Wise (1995b), but none of these studies develops a formal model of what determines withdrawals.

In analyzing withdrawals, it is important to consider the disposition of assets in targeted retirement saving accounts when households reach retirement, as well as pre-retirement withdrawals. A married couple in which the husband is 65 and the wife is 62 can expect to need retirement income for nearly 25 years. Yet we do not know whether households tend to draw down these accounts relatively rapidly, in which case these assets may not have a substantial effect on the wealth position of the oldest old, or whether such assets remain in targeted retirement saving accounts until age 70-1/2, the age at which withdrawals must begin. In the latter case, the growing accumulation of targeted retirement saving account assets may affect the financial status of the oldest old.

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