After decades of building a solid nest egg, retirement is the time to finally crack into it.
Yet, many retirees who were great at saving find themselves less sure about how to spend all that accumulated money.
As part of the survey, ICI looked at what retiree households — defined as those in which the head of household or spouse has retired from their lifetime occupation — do with the funds they withdraw from traditional IRAs.
Following are their answers.
1. Reinvest or save it in another account
Retiree households who used a traditional IRA withdrawal for this purpose: 44%
When you have spent year after year scrimping and saving for retirement, it can be tough to stop. Perhaps that is why so many people who take money out of their IRA put the cash right back to work.
If you are one of these ultra-cautious folks, check out “8 Mistakes That Can Sabotage Your Retirement.”
2. Pay for living expenses
Retiree households who used a traditional IRA withdrawal for this purpose: 37%
The whole point of building a nest egg is to make sure you have enough money to pay the bills in retirement. And for many of the survey respondents, paying for living expenses is the chief reason they tap their IRA.
3. Buy, repair or remodel a home
Retiree households who used a traditional IRA withdrawal for this purpose: 15%
Retirees often tap an IRA is to spruce up their humble home.
While this might sound surprising, it shouldn’t. As we reported in “12 Hard Truths About Retirement,” housing is the No. 1 expense most people face during their golden years.
Other purposes for withdrawals
Here are some other common reasons why retirees tap their IRAs, according to the ICI survey:
- Some other purpose: 12%
- Spent it on a car, boat or big-ticket item other than a home: 6%
- Used it for an emergency: 5%
- Spent it on a health care expense: 4%
- Paid for education: 1%