New research indicates that wealthier preretirees and retirees might need some help figuring out a drawdown strategy for retirement assets, and are reluctant to leave funds in employers’ retirement plans.

In a study examining the impact of parenthood and wealth transfer on retirement funding, Hearts and Wallets considered a specific segment of the population: the 5.2 million households between the ages of 53 and 70 who have from $500,000–$5,000,000 in investable assets and who as a group control about $10 trillion in assets.

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For the study, H&W looked at three consumer groups that make up 82 percent of these households and control 84 percent of the assets: nonparents—households with no children, or 1.8 million households who make decisions about $3.5 trillion; parents who plan to spend all their assets in retirement, or 1.0 million households who make decisions about $1.7 trillion; and parents who plan to leave a legacy, 1.5 million households who make decisions about $3.1 trillion.

While the study looked at a number of attitudes about money, retirement, legacies and planning, one interesting outcome was the revelation that people don’t necessarily do all that well at drawing on retirement funds, no matter whether they intend to leave a legacy or not.

Their spending patterns aren’t optimized to make their retirement income see them all the way through retirement.

They’re also not comfortable with the idea of leaving their retirement money in the hands of their employer.

Some say it’s because they want to cut all ties with the employer, and others are looking for ways to annuitize their money—despite a lack of knowledge about the best time to begin drawing income from an annuity or how best to buy one.

Most—53 percent—would not leave their retirement money in an employer’s retirement plan once they’ve left the job, despite the fact that fees within the plan can be lower than those they may face when considering rollover options or annuity purchases with the money.

This held true across all groups in the study. Only 23 percent indicated that they’d leave 401(k) money where it was, while 17 percent didn’t know.

Instant Insights /

Wealthier plan participants, retirees need drawdown assistance

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