More U.S. workers using distributions for essentials
By Paula Aven Gladych
Fewer Americans are blowing their retirement savings on cars, televisions and electronics when they quit their jobs. Most workers who choose to take a lump-sum distribution from their retirement plan roll it into an IRA or other savings vehicle or use that money to pay down debt or buy a house.
Only a small percentage of workers—7.5 percent—spent their lump sum retirement savings on mindless consumption when they left their job in 2012, according to the Employee Benefit Research Institute. That’s a major improvement from years past. In 1993, for instance, 22.7 percent of those who received a distribution blew the money on nonessentials. That figure dropped to 15.1 percent through 2003.
The number of workers who roll their accounts into tax-qualified savings accounts has increased sharply since 1993, according to EBRI, with 45.2 percent of those receiving a distribution through 2012 doing so.
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From 2010 to 2012, the average account balance that was paid out in a lump-sum distribution was $15,934. The median amount was $10,000. Most lump-sum payouts were small, with 4.6 percent of recipients reporting a distribution of less than $500; 3.4 percent reporting less than $1,000; and 10.1 percent reporting between $1,000 and $2,500. Only 27.4 percent were more than $37,500. The bulk were between $2,500 and $37,499, EBRI found.
More than 56 percent of the distributions in the study took place after 2003 and half of those taking distributions were 40 years old or younger.
Originally published on BenefitsPro.com