When retirees roll over assets from a 401(k) to an individual retirement account, 75% reduce their equity exposure, according to research from J.P. Morgan Asset Management and the Employee Benefit Research Institute.
The research, based on data EBRI collected and studied on 31,000 people as they entered retirement between 2013 and 2018, also found that required minimum distributions appear to be the dominant withdrawal “guidance.” The vast majority of retirees, the research found, did not take distributions before they reached the RMD age, and those older than the RMD age choose to take only the RMD amount.
“The RMD approach is inefficient,” said Katherine Roy, chief retirement strategist at J.P. Morgan Asset Management. “It does not generate income that supports retirees’ declining spending behavior and may leave a sizable account balance at age 100.”
Another key finding was that income and spending in retirement are highly correlated. As income increases with the start of Social Security and RMDs, spending increases, with households that have regular income from an annuity and/or a pension spending more even if they have similar levels of observable retirement wealth.
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