Employees in 401(k) plans are unable to retire as early as pension recipients, but not as later as one might think. 401(k) participants retire an average 15 months later than workers with traditional pensions, a new study finds. Conducted by Boston Colleges Center for Retirement Research, study authors believe that as employers overwhelmingly shift from defined benefit to defined contribution retirement plans, the investment risk 401(k) plans carry has left employees wary of leaving the workforce. In addition, 401(k) plans do not have the explicit early retirement incentives embedded in pension plans that pay more in lifetime benefits to workers who retire as early as 55 or 60. Lastly, most pension benefits are distributed as annuities rather than lump sums, unlike 401(k) assets. "Individuals may behave differently when receiving lump sums, tending to spend more slowly to avoid running out of money," according to the report. "They may prefer to compensate by working longer to build up a larger lump sum."
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