For many years, the government has published statistics on Americans’ age and employment. A version of that data is shown in the chart below. My sense is that these figures are the basis for much of the conventional wisdom on the age at which people retire, as well as for whatever general notions people have about when they’ll start to need “replacement income.”

Employment rates by age and gender, March 2009

Source: Purcell, Patrick. “Income and Poverty Among Older Americans in 2008,” Congressional Research Service. October 2, 2009. Figure 17, page 23.

According to these numbers, less than half of the population is working at ages 62–64, and less than one-third is employed between ages 65 and 69. This implies that there are a lot of youngish retirees out there with a need to “replace their paychecks” in their mid-to-early 60s.

Given these numbers, and that need for income, you might logically expect that many people would start to draw down their IRAs in their mid-60s. But in fact, we don’t typically see that at Vanguard. What’s more, the Investment Company Institute recently issued a report looking at IRA ownership and withdrawals and found that 81% of IRA-owning households ages 59–69 did not take a withdrawal in 2009.

So what’s going on? How are IRA owners ages 65–69, a large fraction of whom are not working, making ends meet?

No doubt Social Security checks play a big role, as do traditional pensions for those who have them. But I suspect it’s something simpler: There is a big difference between individuals and households, and I’d argue that retirement, for many, is a household phenomenon. You can see this difference in a set of figures from the government’s report that look at the incidence of earnings for households (not employment per se, but rather the fraction of individuals or households who report receiving earnings from work).

Percentage of older individuals/households with earnings

Source: Purcell, Patrick. “Income and Poverty Among Older Americans in 2008,” Congressional Research Service. October 2, 2009. Table 1, page 4, and Table 2, page 5. Households categorized by age of the older of the householder or householder’s spouse.

The data show something that may be surprising: The numbers for individuals appear to track the employment numbers above pretty well, but nearly three-fifths of households where the older householder or the householder’s spouse/partner is aged 65–69 are still receiving some income in the form of earnings. Over a third of households in the age 70–79 category are receiving some earnings from work.

Though it’s true that IRAs are individually owned, I’d suspect that a large part of what we see in terms of withdrawal behavior reflects at least a reasonable degree of coordination among household members in managing finances and making decisions about withdrawals. If there is still one member of a couple working, perhaps between that and Social Security, many families feel like they earn enough to get by without spending their savings. Even if some spending from savings is needed, tax planning is likely a consideration. In many cases it can make sense to put off spending IRA assets as long as possible in favor of using other sources.

But this is a lot of extrapolation/speculation/fantasy, based on some aggregate stats. So, let me ask you out there in the real world: Among those of you who are retired, when did you start taking money out of your IRAs? Did you coordinate with a spouse or partner? How did things change once you hit 70½ and then had a requirement to take money out of your retirement accounts?

Note: Links to third-party websites mentioned in this post will open new browser windows. Except where noted, Vanguard accepts no responsibility for content on third-party sites.