A news release from the nonpartisan Employee Benefit Research Institute (EBRI) said fewer participants are spending their distributions.
This choice can profoundly affect participants’ financial resources in retirement, particularly in the case of young workers, the EBRI study said. For example, a 25-year-old who leaves an employer after accumulating a $5,000 account balance would have about $24,600 at age 65, assuming a constant 4% rate of return compounded monthly.
Other findings included:
- 43.4% of lump-sum recipients who received their most recent distribution through 2003 placed all of their distributions in a tax-qualified savings plan such as an individual retirement account or another employment-based plan. This was up from 19.3% through 1993.
- 25.2% of lump-sum recipients who received their most recent distribution through 2003 used any portion of their distribution for new consumption such as buying a home or boat or medical or dental expenses. This was down from 38.3% through 1993.
- $30,072 was the mean (average) distribution; $8,118 was the median distribution. For the most part, lump-sum distributions were relatively small, with a total of 26.2% amounting to less than $2,500. Another 29% were from $2,500 to $10,000.
- Two-thirds of the most recent lump-sum distributions took place from 1994-2003. Nearly 60% of those receiving a lump-sum distribution were ages 21 to 40 when they received the distribution.
The report is here .
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