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What People Don't Know About Their Pensions and Social Security: An Analysis Using Linked Data from the Health and Retirement Study

Listed author(s):
  • Alan L. Gustman
  • Thomas L. Steinmeier

Pension plan descriptions from respondents to the 1992 Health and Retirement Study are compared with descriptions obtained from their employers. Earnings histories reported by respondents are compared with earnings histories from the Social Security Administration. The probability of linking employer pension data, which is two thirds for current jobs, and of obtaining permission to link an earnings history, which is over 70 percent, are not well explained by respondent characteristics. Half of respondents with linked pension data correctly identify plan type, and fewer than half identify, within one year, dates of eligibility for early and normal retirement benefits. Benefit reduction rates are essentially not reported. Respondents do better in reporting pension values, but the unexplained variation is still considerable. In contrast, respondent reported values, together with other observables, account for 80 percent of the variation in pension values and 75 percent of the variation in covered earnings measured from linked records. Thus prospects are good for imputing plan values, but not for imputing the location or size of early retirement incentives. Our findings raise questions about how well respondents understand complex pension and Social Security rules.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7368.

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Date of creation: Sep 1999
Publication status: published as Alan L. Gustman and Thomas L. Steinmeier. “What People Don’t Know About Their Pensions and Social Security”. In William G. Gale, John B. Shoven and Mark J. Warshawsky, editors, Private Pensions and Public Policies. 2004. Washington: D.C., Brookings Institution, pp. 57-125.
Handle: RePEc:nbr:nberwo:7368
Note: AG LS PE
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  1. B. Douglas Bernheim, 1987. "Social Security Benefits: An Empirical Study of Expectations and Realizations," NBER Working Papers 2257, National Bureau of Economic Research, Inc.
  2. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
  3. Alan L. Gustman & Olivia S. Mitchell & Andrew A. Samwick & Thomas L. Steinmeier, "undated". "Evaluating Pension Entitlements," Pension Research Council Working Papers 98-20, Wharton School Pension Research Council, University of Pennsylvania.
  4. Alan L. Gustman & F. Thomas Juster, 1995. "Income and Wealth of Older American Households: Modeling Issues for Public Policy Analysis," NBER Working Papers 4996, National Bureau of Economic Research, Inc.
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