Can We Predict Boomers’ Drawdown Behavior from Earlier Cohorts?

IB#22-8

The brief’s key findings are:

  • Studies show that retirees have tended to draw down their financial wealth very slowly.
  • But these retirees generally had defined benefit (DB) pension plans, which pay benefits for life.
  • Hence, this slow drawdown pattern may not hold for new retirees, who rely on 401(k)s.
  • Indeed, the analysis finds that households with a DB plan retain more of their wealth – that is, they draw it down more slowly than those with a 401(k).
  • For example, a household retiring with $200,000 in savings and a DB plan would retain $28,000 more wealth at age 70 than a similar household with no DB plan.
  • The analysis suggests that many new retirees could deplete their 401(k) assets by age 85, meaning that they face a greater risk of outliving their savings.

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