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Retirement Planning > Saving for Retirement > IRAs

RMDs Drive IRA Withdrawal Decisions: EBRI

By Danielle Andrus

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IRA owners over the age of 70 ½ are required to begin making regular withdrawals from their account, and a report by EBRI found that’s the main reason withdrawals are made at all.

“For traditional IRAs, the overwhelming number of people that are taking withdrawals from them are because they have to under the RMD rules, and for the most part the amount of the withdrawal is only the amount they are required to take out,” Craig Copeland, EBRI senior research associate and author of the report, said in a statement.

(Related: 12 Key Factors for Blended Families in IRAs, Qualified Retirement Plans)

Over half of people who took withdrawals in 2015 were over age 71, the report found. Just over a quarter of people 71 or older took a larger withdrawal than what they were required. Less than 12% of people under age 50 took a withdrawal from an IRA in 2015.

As further evidence of RMD rules being a major force behind withdrawal decisions, only 19% of people who took a withdrawal owned a Roth IRA, which aren’t subject to RMD rules.

Data for the report was drawn from the EBRI IRA Database and is based on 2015 year-end plan information for nearly 28 million accounts owned by over 22 million people. Total assets covered by the database are $2.76 trillion.

About a quarter of all retirement assets in the United States are held in IRAs, according to EBRI, and, for most of the plans in the database, are held in traditional IRAs. Less than a quarter of the plans reviewed by EBRI are Roth IRAs.

Furthermore, only about a quarter of people who had to make a withdrawal took more than they were required to.

Other findings from the report include:

  • On average, IRA owners hold over $125,000 across all their IRAs.
  • The bulk of contributions are coming from rollovers.
  • Despite being far more likely to receive a contribution in 2015 (26% versus 6.5%), Roth IRAs had much lower average balances than traditional accounts.
  • Less than half of Roth owners contributed the maximum allowed, compared with two-thirds of traditional-account owners.

— Read Would ‘Rothification’ of 401(k)s Crush Retirement Savings? on ThinkAdvisor. 

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