When American workers change jobs, an increasing number appear to be leaving their retirement savings intact, according to the Employee Benefit Research Institute (EBRI).
Also, more of those who spent their retirement savings at job change used it to improve or enhance their financial situation, choosing to pay down debt or buy a home, rather than using it for pure consumption.
Using recently released U.S. Census Bureau data, EBRI analyzed the prevalence of how workers take lump-sum distributions from their retirement plans when they change jobs.
“What workers choose to do with their retirement plan assets upon job change can profoundly affect their financial resources in retirement, particularly in the case of younger workers and those with large balances,” says Craig Copeland, senior research associate at EBRI and author of the report.
EBRI notes that the percentage of lump-sum recipients who used the entire amount of their most recent distribution for tax-qualified savings has increased sharply since 1993; more than 45.2% of those who received their most recent distribution through 2012 did so, compared with 35.4% of those who received their most recent distribution in 1998 and 19.3% through 1993.
Furthermore, just 7.5% of recipients whose most recently received distribution through 2012 was spent entirely on consumption, compared with 15.1% for those who received a distribution through 2003 and 22.7% through 1993.