Thursday, June 23 2022

After retirement, nearly half of public sector employees take no action with funds from their defined-contribution pension plans for at least a decade, according to a study by Mission Square Research Institute, which included analysis over 100,000 civil service data records. During their first ten years of retirement, the researchers found that 48% of plan members took no partial payments and 72% took no full payments..

Of the other half, 27% received their first partial payment in the same year of retirement; 11 percent took full disbursement in the first year.

“We know that there is a wide range of options available to pension plan participants after retirement, particularly with respect to tax, risk, asset allocation, account management, expectation lifestyle and financial planning,” said Gerald Youngsenior research analyst at MissionSquare Research Institute and lead author of the report, Disbursement behavior of retirement savings participants. “Our analysis indicates that many plan participants either pay out or transfer their assets immediately or leave them where they are for many years after retirement.”

Specifically, the researchers noted “a flurry of activity in the period immediately after retirement and in the two years following, with almost no activity initiated from the third to the tenth year. This would seem to indicate that participants are acting on transfer or trade plans or decisions. that they have made in the period preceding their retirement, or that they need immediate disbursements.

Among other findings noted in the report, the most distinctive factor among public service retirees dictating when they began to decumulate their accounts – either through disbursements or transfers – was their retirement age, and this data point” correlates to whether they are serving in a general role or in public safety.

Compared to general workers, public safety employees “tend to retire at a younger age, either because of the physical demands of their occupation or because of related provisions in their contracts that allow access to benefits retirement at an earlier age.

The average retirement age for civil servants in the general civil service was 62 and the average retirement age for those in the civil service was 56.

Another notable finding highlighted in the report is that those who accumulated more in their funds were less likely to withdraw them in retirement, while those who had less savings were more likely to withdraw them. About 30% of employees who completely withdrew from their accounts had accumulated between $10,000 and $50,000. A similar trend can be identified with partial disbursement: over 25% of all employees who received partial disbursement had between $100,000 and $250,000, and 15% had between $250,000 and $500,000. .

Among the most notable variables that could skew the data, the researchers noted the pandemic, which is disrupting established retirement norms. It is therefore important that administrators understand employees’ goals and intentionally connect with them.

Amid the ongoing pandemic, “not only are in-person group meetings with participants more difficult to schedule due to remote or hybrid work environments, but participants themselves may decide to leave the public service earlier. early or accelerate their retirement plans. These trends make it all the more important that financial planning communications with plan members be intensified in the few years they may be approaching retirement so that they can have all the information they will need to make sound decisions. in asset deculation,” the report says. said.

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