How Much Income Do Retirees Actually Have? Evaluating the Evidence from Five National Datasets

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Recent research by Bee and Mitchell (2017) has refocused attention on the fact that the Current Population Survey (CPS) underestimates retirement income.  In the wake of this study, some observers have questioned whether other surveys more frequently used by retirement researchers also understate retirement income and, if so, whether prior research suggesting that many households are unprepared for retirement is accurate.  This paper addresses both questions by examining retirement income data from the CPS and four other surveys: 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 paper compares the income measures from each survey to administrative data from tax and Social Security records, both in aggregate and across the income distribution.  It then uses a common measure of retirement income adequacy, the replacement rate, to assess overall household preparedness for retirement.

The paper found that:

  • The SCF, HRS, and SIPP capture nearly 100 percent, 96 percent, and 93 percent of retirement income from administrative data, respectively, and provide largely consistent estimates across the income distribution.
  • The PSID captures over 80 percent of income from administrative data, with most of the underreporting occurring at the top of the income distribution.
  • The CPS is an outlier in terms of its ability to measure retirement income relative to administrative data, capturing just 61 percent. This underreporting exists at all points in the income distribution.
  • The estimates of median replacement rates vary from 55 to 91 percent, depending on the definition of pre-retirement income. Using a target replacement rate of 75 percent, these estimates imply that between 42 and 60 percent of households are at risk of falling short.

The policy implications of the findings are:

  • Research based on these datasets provides an accurate depiction of retirement income in the middle of the income distribution, while the SCF, HRS, and SIPP are accurate throughout the distribution.
  • Estimates from these data indicate many households are still in danger of not having enough resources in retirement.