Qualified Retirement Plans: Analysis of Distribution and Rollover Activity

Victoria L. Bryant, Sarah Holden, and John Sabelhaus

Abstract —One potential downside when employees have the freedom to manage their own retirement accumulations is “leakage” prior to the end of their working careers, which is proxied here using age 60. Leakage occurs when employees take withdrawals prior to retirement, when they cash out distributions at job separation, or when they fail to pay back loans taken out against their accounts. Although leakage has the potential to undermine a participant-driven retirement system, trend analysis shows that aggregate pre-retirement leakage is modest and trending down relative to assets, and stable as a share of gross contributions. The probability of receiving a distribution and the fraction of gross distributions cashed out are roughly equal across income groups, but the portion cashed out represents a higher percentage of income for the lower-income groups.