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The number of workers cashing out their retirement assets when they leave employment seems to be dropping, despite an increase in the availability of lump-sum distributions.
A study by the Employee Benefit Research Institute, Washington, found 50% of departing employees chose to cash out accounts in 1993, compared with 83% in 1983. The largest decrease in the tendency to cash out occurred among workers earning more than $30,000 annually.
The authors of the report, John B. Shoven of Stanford University and Jason S. Scott of Cornerstone Research Inc., San Francisco, suggest the trend might be encouraging in terms of ensuring retirement income adequacy, particularly if coupled with better education.
At the same time, 71.5% of participants said in 1993 that they had the option to take a lump-sum distribution, in contrast to the 47.8% who had that ability in 1983. The availability of cash-out distributions increased for both defined benefit and defined contribution plans.
One trend uncovered was an increase in the typical size of cash-outs. The percentage of all cash-outs larger than $5,000 increased to 19% in 1993 from 13% in 1983. But the overall median-lump sum distribution dropped to $2,000 in 1993, down from $2,320 in 1983.
