What’s Driving IRA Withdrawals?

Only 22% of individuals who owned a traditional or Roth IRA took a withdrawal in 2013, a percentage largely driven by activity among individuals ages 70-1/2 or older.

According to a report by the non-partisan Employee Benefit Research Institute (EBRI), 65% of the individuals who took a withdrawal were age 65 or older, and 51% were age 71 or older (the age at which the federal RMD rules kick in). Just 12% were younger than 50.

The report notes that for those at the RMD age, the withdrawal rates at the median appeared close to the amount that was required to be withdrawn, though some were significantly more. For instance, looking at the consistent sample in the EBRI IRA Database, about 25% of those 71 or older took a withdrawal amount in excess of that required by law for traditional IRAs.

Sustaining Retirement

Significantly, among those age 70 or older, withdrawal rates over a four-year period showed that most individuals were withdrawing at a rate that was likely to be able to sustain some level of post-retirement income from IRAs as the individual continued to age.

The average withdrawal amounts from traditional IRAs increased with the age of the owners through age 64, from $9,227 (among those younger than 30) to $29,687 (among those ages 60-64). At that point, the average withdrawal amount started to decline with age, and slipped to $16,111 for those age 80 or older.

In contrast, the average withdrawal amounts of those who took a withdrawal from a Roth IRA also increased with the age of the owner, but, in contrast to the trend of withdrawals from traditional IRAs, continued through age 80 or older, from $5,176 for those younger than 30 to $33,229 among those 80 or older. Overall, the average traditional IRA withdrawal amount ($20,188) exceeded the average Roth IRA withdrawal amount ($15,530).

Among owners of traditional IRAs with balances of $10,000 or more, the average withdrawal amount increased as the account balance increased, with the average withdrawal reaching $45,368 for owners with balances of $250,000 or more.

Men had higher average withdrawal amounts than women; for example, for traditional IRA owners, $26,763 for men and $15,365 for women.

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