The Composition and Drawdown of Wealth in Retirement

摘要

Our analysis of the composition of wealth at retirement and the drawdown of wealth in the early years of retirement suggests several conclusions. First, many households reach retirement with relatively little financial wealth to support their retirement needs. Half of all households headed by someone between the ages of 65 and 69 in 2008 had total financial assets, including assets in IRAs and 401 (k)s, of less than $52,000. Many providers of single-premium immediate annuities require minimum investments. Forty-three percent of the households aged 65 to 69 would not be able to make a $25,000 minimum investment even if they liquidated all of their financial assets, including personal retirement accounts. Second, for the minority of households that reach retirement with substantial financial assets, the late-life financial planning problem is multifaceted. Thirty percent of retirement-age households have non-annuitized wealth of more than $518,000. For these households, the three most important risks in their retirement years are likely to be longevity risk, uninsured late-life medical expenses, and unfavorable returns on their portfolio assets or their housing investments. There is relatively little evidence that households in the upper half of the wealth distribution spend down financial assets in the early decades of retirement.