Baby boomers and older workers are just as likely to cash out their 401(k) plans as Generation Xers when they change jobs, according to a new study by Hewitt Associates.
"In fact, Generation Xers are actually doing a better job (of building nest eggs) than some older age groups," said Mike McCarthy, 401(k) consultant at Hewitt, Lincolnshire, Ill. "As defined benefit plans are less prominent and there is less reliance on Social Security, Gen Xers see more than any age group that you're individually responsible for your retirement."
While this group rolled their 401(k) account balances into other qualified plans more often than their older counterparts, they took lump-sum distributions as often as baby boomers and older workers.
According to Hewitt's analysis, in 1999, more than half of baby boomers, ages 40 to 57, and 60% of "veterans," ages 58 and 59, take cash payments, compared with 66% of Generation Xers, ages 20 to 39. However, taking the data in nine-year increments, 401(k) participants aged 20 to 29 are still the most likely to cash out, at a rate of 78% last year. And 66% of participants aged 30 to 39, 61% of those aged 40 to 49 and 60% of those aged 50 to 59 took lump-sum cash payments.
Overall, participants have not improved their savings behavior over the years, Mr. McCarthy said.
The consulting firm analyzed 170,000 defined contribution plan distributions for participants aged 20 to 59 in 1999 in plans serviced by Hewitt.