New Congressional Research Study Expresses Concern about Lump Sum Distributions and Retirement Income Security
Close on the heels of Hewitt's study about retirement plan distributions, the subject of a recent posting, comes a Congressional Research Service (CRS) report that expresses concern on the same matter.
The report, Pension Issues: Lump Sum Distributions and Retirement Income Security, pointed out that most recipients of lump sum distributions were more than 20 years away from retirement and warned that:
Lump-sum distributions that are spent rather saved can reduce future retirement income. If the lump-sum distributions received through 2002 that were not rolled over had instead been rolled over into accounts that grew at the same historical rate as the Standard & Poor’s 500 Index, they would have had a median value of $7,214 by 2003. For the typical recipient, if this amount were to remain invested, it would grow to an estimated value of $31,100 by age 65, which would be sufficient to purchase a level, single-life annuity that would pay $225 in monthly income.