Improving the Measurement of Retirement Income of the Aged Population

Research has shown that survey-reported income measures, particularly pension and retirement income, suffer from reporting errors, which lead to biased estimates of income and poverty of the aged population. Two of the Social Security Administration's main publications—Income of the Population 55 or Older and the Income of the Aged Chartbook—are published biennially and are based exclusively on publicly available data from the U.S. Census Bureau. In this paper, we use data from the Census' 2016 Current Population Survey (CPS) Annual Social and Economic Supplement (ASEC) merged with administrative data—Internal Revenue Service (IRS) tax records and Social Security earnings and benefit records—to examine whether and to what extent using these additional data improves income estimates. We also compare those estimates with public-use data from the 2016 Health and Retirement Study (HRS), which has the reputation of being a reliable source of income measures for the aged population. We find that for the population aged 65 or older, supplementing the CPS ASEC with IRS and Social Security administrative data results in a higher estimate of pension income's share of aggregate income, less estimated reliance on Social Security, and a lower estimated rate of poverty. Furthermore, we find that the HRS provides better estimates of the income of the aged population than the public-use CPS data.