Lump Sum Pension Distributions: Evidence from the 1991-1993 Panels of the SIPP

James H. Moore, U.S. Social Security Administration (SSA)
Leslie Muller, U.S. Social Security Administration (SSA)

Are individuals spending or saving lump sum distributions from their employer-sponsored pension plan? We address this question using data from the 1991, 1992, and 1993 panels of the Survey of Income Program and Participation matched to restricted earnings data maintained by the Social Security Administration. To examine the specific uses of lump sums distributions we use both descriptive analysis and a multivariate probit model. Furthermore we introduce an earnings measure from the Social Security record of lifetime earnings, not used in previous lump sum studies - five-year average earnings before the distribution. We examine the role of this earnings measure in affecting lump sum use, along with assessing the relationship of earnings in the year of the distribution and projected average lifetime earnings.