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Trends and Projections in Income Replacement during Retirement

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  • James P. Smith

    (RAND Corporation)

Abstract

This article calculates retirement incomereplacement rates for all labor market cohorts across the last 25 years and describes the changing contributions made by private pensions, social security, and assets. The factors on which replacement rates are sensitive include position in the income distribution, the use of after-tax instead of pretax incomes, the changing family composition of households between their pre- and postretirement years, and differential underreporting of income by age. The debate about reforming the U.S. retirement income system starts from a base where the current system offers high income-replacement rates for most households, especially low-income households.

Suggested Citation

  • James P. Smith, 2003. "Trends and Projections in Income Replacement during Retirement," Journal of Labor Economics, University of Chicago Press, vol. 21(4), pages 755-782, October.
  • Handle: RePEc:ucp:jlabec:v:21:y:2003:i:4:p:755-782
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    File URL: http://dx.doi.org/10.1086/376957
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    References listed on IDEAS

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    1. B. Douglas Bernheim & Jonathan Skinner & Steven Weinberg, 2001. "What Accounts for the Variation in Retirement Wealth among U.S. Households?," American Economic Review, American Economic Association, vol. 91(4), pages 832-857, September.
    2. Banks, James & Blundell, Richard & Tanner, Sarah, 1998. "Is There a Retirement-Savings Puzzle?," American Economic Review, American Economic Association, vol. 88(4), pages 769-788, September.
    3. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters,in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
    4. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
    5. Michael Hurd & F. Thomas Juster & James P. Smith, 2003. "Enhancing the Quality of Data on Income: Recent Innovations from the HRS," Journal of Human Resources, University of Wisconsin Press, vol. 38(3).
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    Cited by:

    1. Frank T. Denton & Ross Finnie & Byron G. Spencer, 2009. "Income Replacement in Retirement: Longitudinal Evidence from Income Tax Records," Social and Economic Dimensions of an Aging Population Research Papers 261, McMaster University.
    2. Russell Cooper & Guozhong Zhu, 2013. "Household Finance: Education, Permanent Income and Portfolio Choice," NBER Working Papers 19455, National Bureau of Economic Research, Inc.
    3. Douglas Hershey & Joy Jacobs-Lawson, 2012. "Bridging the Gap: Anticipated Shortfalls in Future Retirement Income," Journal of Family and Economic Issues, Springer, vol. 33(3), pages 306-314, September.
    4. Finnie, Ross & Spencer, Byron G., 2013. "How do the level and composition of income change after retirement? Evidence from the LAD," CLSSRN working papers clsrn_admin-2013-21, Vancouver School of Economics, revised 29 Apr 2013.
    5. Flood, Lennart & Klevmarken, N. Anders & Mitrut, Andreea, 2006. "The Income of the Swedish Baby Boomers," IZA Discussion Papers 2354, Institute for the Study of Labor (IZA).
    6. Larochelle-Cote, Sebastien & Myles, John & Picot, Garnett, 2008. "Income Security and Stability During Retirement in Canada," Analytical Studies Branch Research Paper Series 2008306e, Statistics Canada, Analytical Studies Branch.
    7. Edward N. Wolff, 2006. "The Adequacy of Retirement Resources among the Soon-to-Retire, 1983-2001," Economics Working Paper Archive wp_472, Levy Economics Institute.
    8. Kluth, Sebastian & Gasche, Martin, 2013. "Ersatzraten in der Gesetzlichen Rentenversicherung," MEA discussion paper series 201311, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    9. Larochelle-Cote, Sebastien & Myles, John & Picot, Garnett, 2008. "Securite et stabilite du revenu a la retraite au Canada," Direction des etudes analytiques : documents de recherche 2008306f, Statistics Canada, Direction des etudes analytiques.

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