Two recent studies by the Employee Benefit Research Institute show how baby boomers and Gen Xers are faring in their retirement readiness (much better thanks to the housing and financial markets), while another shows that those already in retirement are taking “small” withdrawals from their IRAs.
While gains over the past year in the financial and housing markets have boosted Baby Boomers’ and Gen Xers’ retirement readiness, staying on track in the coming years depends on age, income and having access to a 401(k) plan, EBRI found.
The Washington-based EBRI also found that withdrawals from IRAs tend to be small and closely follow the rates dictated by the federal required minimum distribution (RMD) rules that apply to individuals age 70 1/2 or older.
Examining patterns drawn from the proprietary EBRI IRA Database, the median withdrawal rate for those taking a distribution was found to be 7.4 percent for the combination of traditional and Roth IRAs and 6 percent when considering traditional IRAs only. Just over 16 percent of traditional and Roth IRA accounts combined had a withdrawal in 2011 (the latest data available), including 20.5 percent of traditional IRA accounts.
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For its report on retirement readiness, EBRI used its proprietary Retirement Security Projection Model and found that overall retirement income adequacy for Baby Boomers and Generation X households improved last year, though factors like age, income, and especially access to an employment-based 401(k)-type retirement plan can produce “significant individual differences.”
Employers are holding back on both the amount and the timing of 401(k) matching funds and dragging out vesting schedules.
EBRI found that last year’s gains in the financial markets and housing values mean that fewer of these baby boomer and Gen X households are likely to run short of money in retirement.