This paper uses data from the 1992 and 1998 Waves of the Health and Retirement Study (HRS) to examine the extent of retirement wealth erosion from pre-retirement lump-sum distributions. There is little evidence that spent distributions have resulted in significant pension leakage. If spent distributions had been rolled over into a tax-qualified plan instead, they would have represented in present value between 5 and 11 percent of pension and Social Security wealth for the median household that spent a distribution. However, one-quarter of the households that spent distributions—which is 2.25 percent of all households age 51 to 61—could have increased their pension and Social Security wealth by 25 percent or more had the distributions been rolled over into a tax-qualified plan. On the one hand, this suggests that policies that enforce rollovers might not raise the retirement income security of the average American household currently entering retirement or that of the typical household that spent a distribution. On the other, this study was based on a national sample of individuals 51 to 61 years old in 1992. While these data have significant advantages over those used in previous studies, the resulting policy statements are most accurately applied to individuals and households of roughly the same age. If younger individuals have lower propensities toward saving, view pension assets as less dedicated toward retirement, or have greater access to funds (say, through defined contribution plans), then this analysis may underestimate the erosion to retirement income security for younger cohorts.

Document Type

Working Paper






Aging Studies Program Paper Series


Economic Policy | Economics | Public Affairs, Public Policy and Public Administration | Public Policy



Additional Information

Aging studies program paper no.23


Local Input

Creative Commons License

Creative Commons Attribution 4.0 International License
This work is licensed under a Creative Commons Attribution 4.0 International License.



To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.