Most Data Sets Agree on Retiree Income

What kind of financial shape are retirees in?

A 2017 study refocused attention on this old question, and it has taken on greater urgency as more and more baby boomers retire.

The study looked at the accuracy of the U.S. Census Bureau’s Current Population Survey (CPS) and confirmed earlier research showing that it dramatically under-estimates retirees’ income. The under-reporting in the CPS could raise concerns about the accuracy of other surveys that paint a less-than-rosy picture of retirement life.

To get to the bottom of things, the Center for Retirement Research (CRR) dug into other standard sources of survey data on retired households so they could be compared with CPS data. They found that the income estimates in the CPS were much lower than the others and clearly the outlier – the other four data sets roughly agreed on how much income retirees have.

The CRR researchers then selected one of the reliable sources of income data – the Health and Retirement Study (HRS) – to assess how retirees are faring. They concluded that around half of over-65 households may be experiencing difficulty maintaining the standard of living they enjoyed while they were working. The researchers based this on the rule of thumb that they need about 75 percent of their past employment earnings.

To be sure, every survey has its strengths and shortcomings, because they rely on what people say they are getting from their Social Security, retirement plans, and investments.

Nevertheless, the four data sets that CRR analyzed – the Federal Reserve’s Survey of Consumer Finances, the Census Survey of Income and Program Participation, the University of Michigan’s HRS and its Panel Study of Income Dynamics – were able to capture between 81 percent and 98 percent of the actual income that shows up in the IRS and Social Security administrative records – the same benchmarks used in the 2017 CPS study. Their estimates for middle-income households in the four data sets were particularly accurate.  In contrast, the CPS captured only 61 percent of retired households’ actual income.

Setting aside the CPS, the researchers concluded that the other surveys are largely on target – as are concerns about the nation’s retirement population.

To read the entire brief, authored by Anqi Chen, Alicia H. Munnell, and Geoffrey Sanzenbacher, see “How Much Income do Retirees Actually Have? Evaluating the Evidence from Five National Datasets.”

The research reported herein was performed pursuant to a grant from the U.S. Social Security Administration (SSA) funded as part of the Retirement Research Consortium. The opinions and conclusions expressed are solely those of the author(s) and do not represent the opinions or policy of SSA or any agency of the federal government. Neither the United States Government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report. Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsement, recommendation or favoring by the United States Government or any agency thereof.