New MissionSquare Research Institute Study Analyzes Retirement Asset Decumulation Patterns Among Public Workers

A new research report from MissionSquare Research Institute finds that nearly half of public sector employees are taking no action with their defined contribution plan funds once retired. Looking out ten years from general employees’ last contributions, 48% of plan participants had not taken any partial disbursements, and 72% had not taken any full disbursements. In contrast, 27% of plan participants took their first partial disbursement within the same year of retirement, while 11% took a full disbursement that first year.The findings are detailed in a new research report from MissionSquare Research Institute,Retirement Savings Participant Decumulation Behavior. Read the research.This report analyzes the behavior of participants in public service retirement plans in the years after retirement, including how soon funds are decumulated, by what methods, in what amounts, how often, and how common it is for retirees to take no action.“We know there is a wide range of options available to retirement plan participants after retirement, particularly as related to taxation, risk, asset allocation, account management, life expectancy, and financial planning,“ said Gerald Young, MissionSquare Research Institute Senior Research Analyst and lead author of the research report. “Our analysis indicates that many plan participants are either disbursing or transferring their assets immediately or leaving them where they are for many years post-retirement,” Young said.

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Additional research findings are as follows:

  •  The most significant distinction in decumulation behavior among public service employees is the age at which they retire, which correlates to whether they serve in a general role or in a public safety role.
  • While the average age for the financial transactions varies from one to four years after retirement, there is a large percentage of participants who make no such transactions within the first ten years post-retirement.
  • About 30% of participants transfer funds and 12% exchange funds, with most such transactions being for the full account balance.
  • Among disbursements, the majority are in the range of 0-2% of available funds. About 17- 18% of participants take three or more partial disbursements after retiring, with 28% taking a full disbursement.
  • After the first two years post-retirement, there is very little activity initiated, although some recurring disbursements may continue (e.g., required minimum distributions, periodic payments). More than ten years after retirement, approximately half of all participants have still not taken a full disbursement and/or transfer from their retirement plans.

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For this research, a disbursement is when the money leaves the plan, with the participant receiving a direct payment; a transfer is when money leaves the plan and is sent to another financial institution/recordkeeper; and an exchange is when money remains in the plan and the assets are moved from one or many fund(s)/investment(s) within the participant’s account.The analysis is based on a review of anonymized data available from MissionSquare Retirement participants. This dataset includes information on the individual participants’ age, job title, retired status, plan types (457, 401(a), 401(k)), last contribution dates, asset balances, and the various transactions they have initiated to draw down or manage their savings – tracking both the dollar amount and the timing of that decumulation activity.This research builds on the Institute’s past research focused on the accumulation of retirement savings for public service employees, through defined benefit pension plans, the evolving role of defined contribution plans, supplemental retirement savings plans, the enactment of auto-enrollment and escalation provisions, or the use of default contribution rates to nudge additional savings.

MissionSquare Research Institute promotes excellence in state and local government and other public service organizations to attract and retain talented employees. The organization identifies leading practices and conducts research on retirement plans, health and wellness benefits, workforce demographics and skill set needs, labor force development, and topics facing the not-for-profit industry and education sector. MissionSquare Research Institute brings together leaders and respected researchers. More information and access to research and publications are available here.

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