Assessing Economic Resources in Retirement: The Role of Irregular Withdrawals from Tax-Advantaged Retirement Accounts

Abstract

Irregular withdrawals from IRAs and DC pensions are not included in standard measures of household income in the CPS or Health and Retirement Study. Yet, among retirees such withdrawals can supplement regular retirement income to finance consumption. It has been difficult to assess their importance, because of lack of informative survey data. In 2012 the HRS restructured the way it collects information about pensions, improving the measurement of irregular withdrawals from pension accounts. We analyzed HRS 2014 data and found that irregular withdrawals from pensions and IRAs totaled $2,049 for singles and $6,663 for couples averaged over everyone age 55 and older. These irregular withdrawals amount to about 5 percent of income for singles and 10 percent of income for married households. Irregular withdrawals are highest among those in the highest wealth quartile and those in the highest education group, reflecting the higher prevalence of pensions in high-paying jobs that are predominantly held by those with high education. Because of the greater frequency of IRA and pension withdrawals towards high SES individuals, accounting for them has little impact on estimates of the poverty rate.