Mismeasurement of Pensions Before and After Retirement: The Mystery of the Disappearing Pensions with Implications for the Importance of Social Security as a Source of Retirement Support
AbstractA review of the literature suggests that when pension values are measured by the wealth equivalent of promised DB pension benefits and DC balances for those approaching retirement, pensions account for more support in retirement than is suggested when their contribution is measured by incomes received directly from pension plans by those who have already retired. Estimates from the Health and Retirement Study (HRS) for respondents in their early fifties suggest that pension wealth is about 82 percent as valuable as Social Security wealth. In data from the Current Population Survey (CPS), for members of the same cohort, measured when they are 65 to 69, pension incomes are about 58 percent as valuable as incomes from Social Security. Our empirical analysis uses data from the HRS to examine the reasons for these differences in the contributions of pensions as measured in income and wealth data. Key factors accounting for these difference include: a difference in methodology between surveys affecting what is included in pension income; some pension wealth "disappears" at retirement because respondents change their pension into other forms that are not counted as pension income; and the form of annuitization may influence the measure of pension income. A series of caveats notwithstanding, the bottom line is that CPS data on pension incomes received in retirement understates the full contribution pensions make to supporting retirees.
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Bibliographic InfoPaper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp268.
Length: 41 pages
Date of creation: May 2013
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Other versions of this item:
- Alan L. Gustman & Thomas L. Steinmeier & Nahid Tabatabai, 2012. "Mismeasurement of Pensions Before and After Retirement: The Mystery of the Disappearing Pensions with Implications for the Importance of Social Security as a Source of Retirement Support," NBER Working Papers 18542, National Bureau of Economic Research, Inc.
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
- J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
- J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
- J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- James M. Poterba & Steven F. Venti & David A. Wise, 2011.
"The Drawdown of Personal Retirement Assets,"
NBER Working Papers
16675, National Bureau of Economic Research, Inc.
- Poterba, James M. & Wise, David Alsgaard & Venti, Steven F., 2011. "The Drawdown of Personal Retirement Assets," Scholarly Articles 4677548, Harvard Kennedy School of Government.
- Poterba, James M. & Venti, Steven F. & Wise, David A., 2011. "The Drawdown of Personal Retirement Assets," Working Paper Series rwp11-006, Harvard University, John F. Kennedy School of Government.
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