How Much Income Do Retirees Actually Have?

by Anqi Chen, Alicia Munnell, Geoffrey T. Sanzenbacher
Citation
Title:
How Much Income Do Retirees Actually Have?
Author:
Anqi Chen, Alicia Munnell, Geoffrey T. Sanzenbacher
Year: 
2018
Publication: 
Issue in Brief
Volume: 
18
Issue: 
20
Start Page: 
End Page: 
Publisher: 
Center for Retirement Research at Boston College
Language: 
English
URL: 
http://crr.bc.edu/briefs/how-much-income-do-retirees-actually-have/
Select license: 
No License (All right reserved)
DOI: 
PMID: 
ISSN: 
Abstract:

How much income retirees actually have seems like a straightforward question. Researchers often rely on nationally representative surveys to measure the financial resources available to households and inform evaluations of the employer retirement system and the Social Security program. But recent research has undermined confidence in survey data by focusing attention on the understatement of retirement income in one specific dataset – the Current Population Survey (CPS) – and thereby has called into question prior studies showing many households are not well-prepared for retirement. The question is whether other datasets frequently used by researchers also underestimate retirement income and, if so, by how much and where in the income distribution?

This brief, based on a recent paper, compares administrative data from the Internal Revenue Service (IRS) and the Social Security Administration (SSA) to measures of retirement income reported in the CPS and four other commonly used datasets: 1) the Survey of Consumer Finances (SCF); 2) the Health and Retirement Study (HRS); 3) the Panel Survey of Income Dynamics (PSID); and 4) the Survey of Income and Program Participation (SIPP).

The discussion proceeds as follows. The first section describes, for each dataset, the survey design and definition of retirement income. The second section compares retirement income from each dataset with aggregate administrative data, while the third section compares each dataset with administrative data across the income distribution. The fourth section presents the results in the context of the percentage of households at risk of facing a retirement shortfall. The final section concludes that while recent research suggests that older households may have a lot more income than is captured in survey data, those results are unique to the CPS. Other survey data provide income estimates that are much more consistent with administrative data and still suggest that about half of households face a retirement shortfall. 

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