An analysis of lump-sum pension distribution recipients

Monthly Labor Review

Volumn 125, Issue 5, 2002, Pages 29-46

  Moore Jr , James H ^a   Muller, Leslie A ^a  

^a SOCIAL SECURITY ADMINISTRATION   (United States)

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EID: 2942745714     PISSN: 00981818     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (90)

1. Income of the Population 55 or Older (Social Security Administration, Office of Research and Statistics, 1996).
2. John R. Woods, "Pension Benefits Among the Aged: Conflicting Measures and Unequal Distribtuions," Social Security Bulletin, Fall 1996, pp. 3-30.
3. John Sabelhaus and David Weiner, "Disposition of Lump-Sum Pension Distributions: Evidence from Tax Returns," National Tax Journal, September, 1999, pp. 593-613.
4. William F. Bassett, Michael J. Fleming, and Anthony P. Rodrigues, "How Workers Use 401(k) Plans: The Participation, Contribution, and Withdrawal Decisions," National Tax Journal, June 1998.
5. "The Pension Benefit Guaranty Corporation (PBGC) is a Federal corporation created by the Employee Retirement Income Security Act of 1974 (ERISA) to encourage the continuation and maintenance of defined benefit pension plans, provide timely and uninterrupted payment of pension benefits to participants and beneficiaries in plans covered by PBGC, and keep pension insurance premiums at the lowest level necessary to carry out objectives"; from the PBGC website, on the Internet at http://www.pbgc.gov.
6. Employee Benefits in Medium and Large Firms, 1989, Bulletin 2336 (Bureau of Labor Statistics, 1990); Employee Benefits in Medium and Large Private Establishments, 1997, Bulletin 2517, (Bureau of Labor Statistics, September 1999).
7. Employee Benefits in Medium and Large Firms, 1989, Bulletin 2336 (Bureau of Labor Statistics, 1990); Employee Benefits in Medium and Large Private Establishments, 1997, Bulletin 2517, (Bureau of Labor Statistics, September 1999).
8. For a more compete description of cash balance plans, see Kenneth R. Elliott and James H. Moore, Jr., "Cash Balance Pension Plans: The New Wave," Compensation and Working Conditions, Summer, 2000, pp. 3-12.
9. Employee Benefits in Medium and Large Private Establishments, 1993, Bulletin 2456, (Bureau of Labor Statistics, 1995); Employee Benefits in Medium and Large Private Establishments, 1997, Bulletin 2517, (Bureau of Labor Statistics, September 1999).
10. Employee Benefits in Medium and Large Private Establishments, 1993, Bulletin 2456, (Bureau of Labor Statistics, 1995); Employee Benefits in Medium and Large Private Establishments, 1997, Bulletin 2517, (Bureau of Labor Statistics, September 1999).
11. For more on the growth of defined contribution plans, see Richard P. Hinz and John A. Turner, "Pension Coverage Initiatives: Why Don't Workers Participate?" in Olivia S. Mitchell and Sylvester Schieber, eds., Living with Defined Contribution Pensions: Remaking Responsibility for Retirement (Philadelphia, PA, University of Pennsylvania Press, 1998); Gary Klunman, Asokan Anadarajan, and Kenneth Lawrence, "An Analysis of the Move Toward Defined Contribution Plans: Are the Rewards Commensurate with the Risks?" Journal of Pension Planning and Compliance, Fall, 1999, pp. 61-89; Olivia S. Mitchell, "Developments in Pensions," NBER Reporter (National Bureau of Economic Research, 1998); Leslie E. Papke, "Are 401(k) Plans Replacing Other Employer-Provided Pensions? Evidence from Panel Data," Journal of Human Resources, Spring 1999, pp. 346-68; Leslie E. Papke, Mitchell Peterson, and James M. Poterba, "Do 401(k) Plans Replace Other Employer-Provided Pensions?" Advances in the Economics of Aging (Chicago and London, National Bureau of Economic Research Project Report Series, 1996), pp. 219-36.
12. For more on the growth of defined contribution plans, see Richard P. Hinz and John A. Turner, "Pension Coverage Initiatives: Why Don't Workers Participate?" in Olivia S. Mitchell and Sylvester Schieber, eds., Living with Defined Contribution Pensions: Remaking Responsibility for Retirement (Philadelphia, PA, University of Pennsylvania Press, 1998); Gary Klunman, Asokan Anadarajan, and Kenneth Lawrence, "An Analysis of the Move Toward Defined Contribution Plans: Are the Rewards Commensurate with the Risks?" Journal of Pension Planning and Compliance, Fall, 1999, pp. 61-89; Olivia S. Mitchell, "Developments in Pensions," NBER Reporter (National Bureau of Economic Research, 1998); Leslie E. Papke, "Are 401(k) Plans Replacing Other Employer-Provided Pensions? Evidence from Panel Data," Journal of Human Resources, Spring 1999, pp. 346-68; Leslie E. Papke, Mitchell Peterson, and James M. Poterba, "Do 401(k) Plans Replace Other Employer-Provided Pensions?" Advances in the Economics of Aging (Chicago and London, National Bureau of Economic Research Project Report Series, 1996), pp. 219-36.
13. For more on the growth of defined contribution plans, see Richard P. Hinz and John A. Turner, "Pension Coverage Initiatives: Why Don't Workers Participate?" in Olivia S. Mitchell and Sylvester Schieber, eds., Living with Defined Contribution Pensions: Remaking Responsibility for Retirement (Philadelphia, PA, University of Pennsylvania Press, 1998); Gary Klunman, Asokan Anadarajan, and Kenneth Lawrence, "An Analysis of the Move Toward Defined Contribution Plans: Are the Rewards Commensurate with the Risks?" Journal of Pension Planning and Compliance, Fall, 1999, pp. 61-89; Olivia S. Mitchell, "Developments in Pensions," NBER Reporter (National Bureau of Economic Research, 1998); Leslie E. Papke, "Are 401(k) Plans Replacing Other Employer-Provided Pensions? Evidence from Panel Data," Journal of Human Resources, Spring 1999, pp. 346-68; Leslie E. Papke, Mitchell Peterson, and James M. Poterba, "Do 401(k) Plans Replace Other Employer-Provided Pensions?" Advances in the Economics of Aging (Chicago and London, National Bureau of Economic Research Project Report Series, 1996), pp. 219-36.
14. For more on the growth of defined contribution plans, see Richard P. Hinz and John A. Turner, "Pension Coverage Initiatives: Why Don't Workers Participate?" in Olivia S. Mitchell and Sylvester Schieber, eds., Living with Defined Contribution Pensions: Remaking Responsibility for Retirement (Philadelphia, PA, University of Pennsylvania Press, 1998); Gary Klunman, Asokan Anadarajan, and Kenneth Lawrence, "An Analysis of the Move Toward Defined Contribution Plans: Are the Rewards Commensurate with the Risks?" Journal of Pension Planning and Compliance, Fall, 1999, pp. 61-89; Olivia S. Mitchell, "Developments in Pensions," NBER Reporter (National Bureau of Economic Research, 1998); Leslie E. Papke, "Are 401(k) Plans Replacing Other Employer-Provided Pensions? Evidence from Panel Data," Journal of Human Resources, Spring 1999, pp. 346-68; Leslie E. Papke, Mitchell Peterson, and James M. Poterba, "Do 401(k) Plans Replace Other Employer-Provided Pensions?" Advances in the Economics of Aging (Chicago and London, National Bureau of Economic Research Project Report Series, 1996), pp. 219-36.
15. For more on the growth of defined contribution plans, see Richard P. Hinz and John A. Turner, "Pension Coverage Initiatives: Why Don't Workers Participate?" in Olivia S. Mitchell and Sylvester Schieber, eds., Living with Defined Contribution Pensions: Remaking Responsibility for Retirement (Philadelphia, PA, University of Pennsylvania Press, 1998); Gary Klunman, Asokan Anadarajan, and Kenneth Lawrence, "An Analysis of the Move Toward Defined Contribution Plans: Are the Rewards Commensurate with the Risks?" Journal of Pension Planning and Compliance, Fall, 1999, pp. 61-89; Olivia S. Mitchell, "Developments in Pensions," NBER Reporter (National Bureau of Economic Research, 1998); Leslie E. Papke, "Are 401(k) Plans Replacing Other Employer-Provided Pensions? Evidence from Panel Data," Journal of Human Resources, Spring 1999, pp. 346-68; Leslie E. Papke, Mitchell Peterson, and James M. Poterba, "Do 401(k) Plans Replace Other Employer-Provided Pensions?" Advances in the Economics of Aging (Chicago and London, National Bureau of Economic Research Project Report Series, 1996), pp. 219-36.
16. Employee Benefits in Medium and Large Private Establishments, 1993, Bulletin 2456, (Bureau of Labor Statistics, 1995); Employee Benefits in Medium and Large Private Establishments, 1997, Bulletin 2517, (Bureau of Labor Statistics, September 1999).
17. Employee Benefits in Medium and Large Private Establishments, 1993, Bulletin 2456, (Bureau of Labor Statistics, 1995); Employee Benefits in Medium and Large Private Establishments, 1997, Bulletin 2517, (Bureau of Labor Statistics, September 1999).
18. Vesting refers to the amount of time an individual must work before earning a nonforfeitable right to their accrued benefit. When an individual is fully vested, the accrued benefit is the amount they are eligible to receive when they separate from the employer. Employers may provide different vesting schedules as long as it meets the minimum requirements set by ERISA for counting vesting service.
19. Employers may want to cash out relatively small balances for two reasons: the relatively high administrative cost of maintaining records on former employees with small balances, and the requirement that employers pay premiums to the Pension Benefit Guarantee Corporation (PBGC) for these accounts. PBGC premiums are paid per employee, which makes holding a small balance that much more costly to the employer. See Patrick J. Purcell, "Lump-Sum Distributions and Retirement Income Security," Journal of Pension Planning and Compliance, Fall, 2000, pp. 27-60; "Cashing Out Terminated Participants' Vested Benefits Simplifies Plan Administration, Reduces PBGC Premiums," Spencer's Research Reports (Chicago, IL, Charles D. Spencer and Associates, October 3, 1997); and the website of Charles D. Spencer and Associates, on the Internet at www.spencernet.com.
20. Employers may want to cash out relatively small balances for two reasons: the relatively high administrative cost of maintaining records on former employees with small balances, and the requirement that employers pay premiums to the Pension Benefit Guarantee Corporation (PBGC) for these accounts. PBGC premiums are paid per employee, which makes holding a small balance that much more costly to the employer. See Patrick J. Purcell, "Lump-Sum Distributions and Retirement Income Security," Journal of Pension Planning and Compliance, Fall, 2000, pp. 27-60; "Cashing Out Terminated Participants' Vested Benefits Simplifies Plan Administration, Reduces PBGC Premiums," Spencer's Research Reports (Chicago, IL, Charles D. Spencer and Associates, October 3, 1997); and the website of Charles D. Spencer and Associates, on the Internet at www.spencernet.com.
21. Technically, leaving the money in the former employer's plan is not "rolling over" or "transferring" any funds. We classify this use as a rollover in keeping with the general definition of maintaining the funds in a tax-deferred plan.
22. The Health and Retirement Study (HRS) - sponsored by the National Institute on Aging (part of the National Institutes of Health) and conducted by the University of Michigan's Institute for Social Research - is designed "to provide data for researchers, policy analysts, and program planners who are making major policy decisions that affect retirement, health insurance, saving and economic well-being" (from the HRS website, on the Internet at www.umich.edu/∼hrswww/ index.html).
23. Michael D. Hurd, Lee Lillard, and Constantijn Panis, "An Analysis of the Choice to Cash-Out, Maintain, or Annuitize Pension Rights at Job Change or Retirement.," RAND Working Paper DRU-1979-DOL, October 1998.
24. Angela E. Chang, "Tax Policy, Lump-Sum Pension Distributions, and Household Saving," National Tax Journal, June 1996, pp. 235-52.
25. High-income workers are those with annual incomes exceeding 539,999 (in 1987 dollars).
26. Chang, "Tax Policy, Lump-Sum Pension Distributions, and House-hold Saving." Chang uses two models to estimate the penalty's effect; this result is using a difference-in-difference approach. She also presents a standard probit, which estimates that a 1-percent increase in the tax rate increases the rollover probability by 0.4 percentage point for high-income individuals and 0.2 percentage points for low-income individuals.
27. Ibid.
28. Internal Revenue Code (IRC) §3405 9 (c) (1).
29. Whether the individual gets back the 20-percent withheld ultimately depends on whether he has overpaid in total income taxes for that year. This is the case regardless of whether he re-invests the money in a tax-deferred instrument within 60 days.
30. Paul Fronstin and others, "Lump-Sum Distributions and Rollovers," in Deborah Holmes, ed., EBRI Databook on Employee Benefits (Washington, DC, Employee Benefit Research Institute, 1997), pp. 135-40.
31. The Retirement Confidence Survey (RCS) is conducted by the Employee Benefits Research Institute (EBRI): "Since 1991, the RCS has tracked Americans' financial preparations for retirement and their attitudes regarding retirement. The RCS is a random, nationally representative survey of 1,000 Americans over age 25. Both current workers and current retirees are surveyed; this allows comparisons across generations in terms of attitudes and financial preparations. The survey contains a core set of questions that is asked annually and is used to track key attitudes and behavior patterns over time. The survey also strives to be timely by covering issues that are of current interest to policymakers and retirement benefits specialists; examples include participant education in 401(k) plans, public attitudes regarding Social Security reform, and individual's attitudes regarding investing for retirement"; from the RCS page of the EBRI website, on the Internet at http://www.ebri.org/.
32. Leonard E. Burman, Norma B. Coe, and William G. Gale, "Lump-Sum Distributions from Pension Plans: Recent Evidence and Issues for Policy and Research," National Tax Journal, September 1999, pp. 553-62.
33. Patrick J. Purcell, "Lump-Sum Distributions and Retirement Income Security."
34. Leonard E. Burman and others, "Lump-Sum Distributions from Pension Plans."
35. Ibid.
36. Paul Yakoboski, "Large Plan Lump-Sums: Rollovers and Cashouts," EBRI Issue Brief, No. 188 (Washington, DC, Employee Benefit Research Institute, August 1997).
37. Ibid.
38. Sabelhaus and Weiner, "Disposition of Lump-Sum Pension Distributions."
39. See, for example, William F. Bassett and others, "How Workers Use 401(k) Plans"; James M. Poterba, Steven F. Venti, and David A. Wise, "Lump-Sum Distributions from Retirement Savings Plans: Receipt and Utilization," in David A. Wise, ed., Inquiries in the Economics of Aging (Chicago, University of Chicago Press, 1998) pp. 85-108; and Leonard E. Burman and others, "Lump-Sum Distributions from Pension Plans."
40. See, for example, William F. Bassett and others, "How Workers Use 401(k) Plans"; James M. Poterba, Steven F. Venti, and David A. Wise, "Lump-Sum Distributions from Retirement Savings Plans: Receipt and Utilization," in David A. Wise, ed., Inquiries in the Economics of Aging (Chicago, University of Chicago Press, 1998) pp. 85-108; and Leonard E. Burman and others, "Lump-Sum Distributions from Pension Plans."
41. See, for example, William F. Bassett and others, "How Workers Use 401(k) Plans"; James M. Poterba, Steven F. Venti, and David A. Wise, "Lump-Sum Distributions from Retirement Savings Plans: Receipt and Utilization," in David A. Wise, ed., Inquiries in the Economics of Aging (Chicago, University of Chicago Press, 1998) pp. 85-108; and Leonard E. Burman and others, "Lump-Sum Distributions from Pension Plans."
42. William F. Bassett and others, "How Workers Use 401(k) Plans."
43. Patrick J. Purcell, "Lump-Sum Distributions and Retirement Income Security."
44. Gary V. Englehardt, "Pre-Retirement Lump-Sum Pension Distributions and Retirement Income Security: Evidence from the Health and Retirement Study," Aging Studies Program Paper No. 23 (Syracuse University, Maxwell School of Citizenship and Public Affairs, Center for Policy Research, June 2001).
45. James M. Poterba and others, "Lump-Sum Distributions from Retirement Savings Plans."
46. Michael D. Hurd, Lee Lillard, and Constantijn Panis, "An Analysis of the Choice to Cash-Out, Maintain, or Annuitize Pension Rights at Job Change or Retirement.," RAND Working Paper DRU-1979-DOL, October 1998.
47. It also should be noted that the only older individuals (aged 51-61 in 1992) are in the HRS sample, which makes the statistics on the number of rollovers and amount of rollovers naturally higher (than the CPS or SIPP), because the likelihood of rollovers and size of the distribution have been shown to increase with age.
48. See Michael D. Hurd and others, "An Analysis of the Choice to Cash-Out"; William F. Bassett and others, "How Workers Use 401(k) Plans "; James M. Poterba and others, "Lump-Sum Distributions From Retirement Saving Plans "; and Patrick J. Purcell, "Lump-Sum Distributions and Retirement Income Security."
49. See Michael D. Hurd and others, "An Analysis of the Choice to Cash-Out"; William F. Bassett and others, "How Workers Use 401(k) Plans "; James M. Poterba and others, "Lump-Sum Distributions From Retirement Saving Plans "; and Patrick J. Purcell, "Lump-Sum Distributions and Retirement Income Security."
50. See Michael D. Hurd and others, "An Analysis of the Choice to Cash-Out"; William F. Bassett and others, "How Workers Use 401(k) Plans "; James M. Poterba and others, "Lump-Sum Distributions From Retirement Saving Plans "; and Patrick J. Purcell, "Lump-Sum Distributions and Retirement Income Security."
51. See Michael D. Hurd and others, "An Analysis of the Choice to Cash-Out"; William F. Bassett and others, "How Workers Use 401(k) Plans "; James M. Poterba and others, "Lump-Sum Distributions From Retirement Saving Plans "; and Patrick J. Purcell, "Lump-Sum Distributions and Retirement Income Security."
52. Poterba and others, "Lump-Sum Distributions From Retirement Saving Plans."
53. Ibid.; Purcell, "Lump-Sum Distributions and Retirement Income Security."
54. Ibid.; Purcell, "Lump-Sum Distributions and Retirement Income Security."
55. Poterba and others, "Lump-Sum Distributions From Retirement Saving Plans."
56. Purcell, "Lump-Sum Distributions and Retirement Income Security."
57. Poterba and others, "Lump-Sum Distributions From Retirement Saving Plans"; William F. Bassett and others, "How Workers Use 401(k) Plans."
58. Poterba and others, "Lump-Sum Distributions From Retirement Saving Plans"; William F. Bassett and others, "How Workers Use 401(k) Plans."
59. Purcell, "Lump-Sum Distributions and Retirement Income Security."
60. Poterba and others, "Lump-Sum Distributions From Retirement Saving Plans"; Purcell, "Lump-Sum Distributions and Retirement Income Security."
61. Poterba and others, "Lump-Sum Distributions From Retirement Saving Plans"; Purcell, "Lump-Sum Distributions and Retirement Income Security."
62. Poterba and others, "Lump-Sum Distributions From Retirement Saving Plans."
63. The 1993 panel is the most recent SIPP pension data available at this time.
64. We also construct some of our variables from the core files and the Work History topical module.
65. The pooled weight we use was constructed to reflect the U.S. population for the one month in which all three panels overlap, which is June 1993. The Pension topical module itself, which is fielded in wave 7 in 1991, wave 4 in 1992, and wave 9 in 1993, does not overlap in any one month. For more information on the construction of the weights, contact the authors.
66. "The Consumer Price Index (CPI) measures the average change in the prices paid by urban consumers for a fixed market basket of goods and services. The Bureau of Labor Statistics (BLS) calculates the CPI monthly and publishes it about 2 weeks after the end of the month to which it refers." The CPI often is used as a "deflator" to convert current dollars to constant dollars. For more information on the CPI, see "The Consumer Price Index," in BLS Handbook of Methods, Bulletin 2490 (Bureau of Labor Statistics, April 1997), ch. 17, pp. 167-230; quote, p. 167.
67. There were 54,581 individuals in the 1991-93 panels interviewed for the Pension topical module, of which 6,851 said they had received at least one lump-sum distribution from a previous plan. Of these 6,851 respondents, 29 percent (1,958 individuals) were drawn from the 1991 panel, 37 percent (2,568 individuals) were drawn from the 1992 panel, and 34 percent (2,325 individuals) were drawn from the 1993 panel.
68. The most common reason why an SER record is not matched is because the respondent did not give the Bureau of the Census permission to use his Social Security number to link his SIPP record to his earnings in the SER.
69. Individuals employed in jobs not covered by Social Security have zeros in the SER data for that year, because these earnings do not have to be reported to the Social Security Administration. We drop these individuals with no earnings in the year of the distribution because zero may not accurately reflect their earnings for that year. The SIPP does not report earnings other than those at the time of the interview.
70. The categories as they are coded in the SIPP are as follows: rolled over the funds into an IRA or put them into another (or same) pension or retirement plan; purchased a home or paid off a mortgage; put it in a savings account; invested it in some other instrument (e.g., stocks, money market accounts); used it to start or purchase a business; used it for children's education; used it for a period of unemployment; paid off loans, bills, or spent it on other items; bought a car, boat, or other vehicle; paid medical or dental expenses; used it for general everyday expenses.
71. There actually were 4,617 individuals who gave one use for their distribution, but 7 of these individuals did not report either the year of the distribution or the amount of the distribution. Because two of the characteristics we focus on in the descriptive analysis are age at the time of the distribution and amount of the distribution, we drop these 7 individuals because we lack sufficient information on these characteristics for them.
72. Interested readers may obtain tables describing lump-sum uses for individuals having one or multiple uses for their distributions in appendix A, which is not printed here, but is available directly from the authors. We chose to include data on multiple responses in an appendix and focus on limiting the sample to one use for two reasons. First, we are able to express the percentages using individuals (rather than responses), which enables the reader to more readily compare our results with those of other research. We also noticed that workers who used the distribution in multiple ways tended to use part of the distribution in many of the same ways - namely, in the category of paid bills/other expenses and everyday expenses. Because we don't know the percentage put to these uses, it is difficult to compare the uses with one another in a meaningful way.
73. We classify paid bills/bought other items as consumption because we cannot distinguish between those who used the distribution to pay off loans (saving) or who spent it on other items (consumption).
74. Lump-sum uses categorized by earnings for the year of the distribution and for average projected lifetime annual earnings can be found in Appendix B, which is not published here, but is available from the authors upon request.
75. Chang found similar results using the 1988 CPS, with 7 percent of the sample using their lump sums to fund unemployment. Angela E. Chang, "Tax Policy, Lump-Sum Pension Distributions, and Household Saving."
76. Poterba and others, "Lump-Sum Distributions From Retirement Saving Plans."
77. For example, suppose an individual reported three uses for his lump sum: purchased stocks, purchased a car, and gave an answer coded as "undeterminable." This individual would not be classified as having saved his distribution using the more narrow definition of saving, but under the broader definition, he would be considered to have saved the distribution.
78. Leonard E. Burman and others, "Lump-Sum Distributions from Pension Plans."
79. Both marital status and total household net wealth are for the period at the time of the interview.
80. In previous lump-sum studies, race and marital status have not been shown to be correlated with lump-sum disposition. However, since these demographic measures are often found to affect savings behavior, we include them in our model.
81. We also include a dummy variable to flag the respondents who had zero earnings in the year of the distribution that were age 62 or older at the time of the distribution. We assume that retirement triggered the lump sum - hence, the zero earnings in that year.
82. This F statistic is for the 5-year average specification using the broad definition of saving.
83. One exception is the age variables. The magnitude of the estimates for age in the projected lifetime earnings specifications (the third column in table 5) is much higher than the magnitude of the age estimates in the other two earnings specifications. It is possible that this observed larger effect of age in column (3) is influenced by the construction of the lifetime earnings measure itself. Because the lifetime earnings measure is an average over a lifetime, its value does not depend on age. However, according to the lifecycle model of saving, age would affect earnings at the time of the distribution, as well as 5 years before the distribution. Hence, much of the explanatory power that the age variable brings to the model may be picked up in the earnings variables themselves in the year of the distribution and average 5-year specifications, resulting in a smaller observed effect of age on lump-sum choice when using earnings for the year of the distribution or 5-year average earnings.
84. Appendix C, available from the authors, includes a table of weighted estimates. We include weighted results only to show that weighting the observations does not change our basic conclusions. Hence, we only present the results of one specification - using the broad definition of saving and the 5-year average earnings measure. It should be noted that the decision to use this definition of saving and this earnings measure was made somewhat arbitrarily; any of the other specifications also could have been used for this table.
85. We find that when we take the earnings variable out of the model (regardless of which earnings measure is used) the estimate on the female dummy becomes small, negative, and statistically significant at the 5-percent level.
86. IRAS and other tax-deferred vehicles impose a penalty for withdrawal before the recipient reaches age 591/2.
87. Purcell, "Lump-Sum Distributions and Retirement Income Security."
88. For example, an individual may have had an unusually low earnings year (say, $25,000) at the time of the distribution, placing him or her in the 515-30,000 earnings category for that earnings measure. However, average projected lifetime annual earnings are higher, at 550,000, placing him in the greater-than-$50,000 category for that earnings measure.
89. Leslie A. Muller, "Retirement Education and Pension Preservation: Does Retirement Education Teach Individuals to Save Pension Distributions?" Social Security Bulletin (forthcoming).
90. Douglas B. Bernheim and Daniel M. Garrett, "The Determinants and Consequences of Financial Education in the Workplace: Evidence from a Survey of Households," NBER Working Paper 5667 (National Bureau of Economic Research, Cambridge, MA, July 1996).