IRA Withdrawals: Who and How Much?
Retirees are not the only ones taking withdrawals from individual retirement accounts (). An analysis by the Employee Benefit Research Institute ( ) found that individuals aged 54 or younger owned 22.1% of IRAs with a withdrawal made in 2011. Those over the 59½ threshold age for taking withdrawals were in the majority, however, owning 65.1% of accounts with a withdrawal occurring. (A 10% penalty is applied on IRA withdrawals made by those below 59½ unless certain conditions are met.)
Withdrawal amounts, as measured in dollars, peaked early in retirement. Traditional IRA withdrawals rose to $22,775 for account owners aged 60 to 64 before drifting downward. Roth IRA withdrawals peaked at $23,196 for account holders aged 65 to 69 before drifting slightly downward and then stabilizing.
The EBRI notes that the average numbers mask big variances in the size of withdrawals. Among those aged 60 to 64, the median withdrawal from all IRA accounts was $10,000 in 2011. In comparison, withdrawals were $4,000 in the 25th percentile and $25,000 in the 75th withdrawal percentile.
Since withdrawals are relative to the account size, the EBRI also looked at withdrawal rates. Withdrawal rates peaked in the 25–44 age bracket with a median of 43.3% for all accounts. Among the older age brackets, withdrawal rates decreased from a median 13.8% for those aged 60 to 64 to a median of 5.5% for those aged 75 to 84. Withdrawals then rebounded to 7.6% in the 85 or older age bracket. This is consistent with studies of retirement spending showing a decrease in spending throughout much of retirement before rising late in life to cover health care expenses.
Rollovers were also examined by the EBRI to try to determine the reasons for the withdrawals. Median withdrawals equaled 51.6% of the rollovers in traditional IRAs. Further, 29.5% of traditional IRAs with both a withdrawal and a rollover had a withdrawal in excess of 100% of the rollover. The ERBI interprets this as an indication that some people were taking advantage of the differing retirement account tax rules, while others may have simply been moving a large portion of their retirement savings around.
Source: “IRA Withdrawals, 2011,” Craig Copeland, Ph.D., EBRI Notes, February 2014.