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Pension Wealth, Age-Wealth Profiles, and the Distribution of Net Worth

In: The Measurement of Saving, Investment, and Wealth

Author

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  • Ann McDermed
  • Robert L. Clark
  • Steven G. Allen

Abstract

This study estimates the magnitude of pension wealth and compares pension wealth to net worth for households in the 1983 Survey of Consumer Finance (SCF). The SCF is the first data set to provide detailed information on both household finances and pension characteristics. The pension information is provided by the employer, so that it is much more detailed and likely to be more accurate than the pension data used in previous studies. Pension wealth was estimated under two sets of assumptions. Under the projected earnings approach, mean pension wealth is $98,291, which represents 43 percent of mean net worth for households with pensions. Under the legal method of calculating pension wealth, mean pension wealth is $47,541, which represents 26 percent of mean net worth for households with pensions. Both estimates are much larger than those obtained in earlier studies. The study also examines how estimates of inequality in the wealth distribution change when pension wealth is added to household balance sheets. Using a variety of methods and assumptions, the distribution becomes more equal when the definition of wealth is expanded to include pension assets.
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Suggested Citation

  • Ann McDermed & Robert L. Clark & Steven G. Allen, 1989. "Pension Wealth, Age-Wealth Profiles, and the Distribution of Net Worth," NBER Chapters, in: The Measurement of Saving, Investment, and Wealth, pages 689-736, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:8129
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    References listed on IDEAS

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    1. Wise, David A., 1985. "Pensions, Labor, and Individual Choice," National Bureau of Economic Research Books, University of Chicago Press, number 9780226902937, February.
    2. Steven G. Allen & Robert L. Clark & Daniel A. Sumner, 1986. "Postretirement Adjustments of Pension Benefits," Journal of Human Resources, University of Wisconsin Press, vol. 21(1), pages 118-137.
    3. Robert B. Avery & Glenn B. Canner & Gregory E. Elliehausen & Thomas A. Gustafson, 1984. "Survey of consumer finances, 1983: a second report," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Dec, pages 857-868.
    4. Richard A. Ippolito, 1987. "Why Federal Workers Don't Quit," Journal of Human Resources, University of Wisconsin Press, vol. 22(2), pages 281-299.
    5. Ippolito, Richard A, 1985. "The Labor Contract and True Economic Pension Liabilities," American Economic Review, American Economic Association, vol. 75(5), pages 1031-1043, December.
    6. Laurence J. Kotlikoff & David A. Wise, 1985. "Labor Compensation and the Structure of Private Pension Plans: Evidence for Contractual versus Spot Labor Markets," NBER Chapters, in: Pensions, Labor, and Individual Choice, pages 55-88, National Bureau of Economic Research, Inc.
    7. Robert B. Avery & Glenn B. Canner & Gregory E. Elliehausen & Thomas A. Gustafson, 1984. "Survey of consumer finances, 1983," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Sep, pages 679-692.
    8. Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324, Elsevier.
    9. Robert L. Clark & Ann A. McDermed, 1986. "Earnings and Pension Compensation: The Effect of Eligibility," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 341-361.
    10. Feldstein, Martin S, 1982. "Social Security and Private Saving: Reply," Journal of Political Economy, University of Chicago Press, vol. 90(3), pages 630-642, June.
    11. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-926, Sept./Oct.
    12. David A. Wise, 1985. "Pensions, Labor, and Individual Choice," NBER Books, National Bureau of Economic Research, Inc, number wise85-1, January.
    13. Jeremy I. Bulow, 1982. "What are Corporate Pension Liabilities?," The Quarterly Journal of Economics, Oxford University Press, vol. 97(3), pages 435-452.
    14. Olivia S. Mitchell, 1982. "Fringe Benefits and Labor Mobility," Journal of Human Resources, University of Wisconsin Press, vol. 17(2), pages 286-298.
    15. Munnell, Alicia H, 1976. "Private Pensions and Saving: New Evidence," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 1013-1032, October.
    16. Quinn, Joseph F, 1985. "Retirement Income Rights as a Component of Wealth in the United States," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 31(3), pages 223-236, September.
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    Cited by:

    1. Jang-Ting Guo & Kevin J. Lansing, 1994. "The welfare effects of tax simplification: a general-equilibrium analysis," Working Papers (Old Series) 9409, Federal Reserve Bank of Cleveland.
    2. Alan L. Gustman & Thomas L. Steinmeier, 2000. "Pensions and Retiree Health Benefits in Household Wealth: Changes from 1969 to 1992," Journal of Human Resources, University of Wisconsin Press, vol. 35(1), pages 30-50.
    3. Michael D. Hurd, 1989. "Issues and Results from Research on the Elderly I: Economic Status (Part I of III Parts)," NBER Working Papers 3018, National Bureau of Economic Research, Inc.
    4. Kevin J. Lansing, 1993. "Dynamic optimal fiscal and monetary policy in a business cycle model with income redistribution," Working Papers (Old Series) 9308, Federal Reserve Bank of Cleveland.
    5. Arthur B. Kennickell & Annika E. Sunden, 1997. "Pensions, social security, and the distribution of wealth," Finance and Economics Discussion Series 1997-55, Board of Governors of the Federal Reserve System (U.S.).
    6. Alan J. Auerbach & Laurence J. Kotlikoff & David N. Weil, 1992. "The Increasing Annuitization of the Elderly- Estimates and Implications for Intergenerational Tranfers, Inequality, and National Saving," NBER Working Papers 4182, National Bureau of Economic Research, Inc.
    7. Alan L. Gustman & Olivia S. Mitchell & Andrew A. Samwick & Thomas L. Steinmeier, "undated". "Pension and Social Security Wealth in the Health and Retirement Study," Pension Research Council Working Papers 97-3, Wharton School Pension Research Council, University of Pennsylvania.

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