Longitudinal patterns in cohort income inequality, income instability, and income trajectories of a US cohort on the cusp of retirement

Previous research has shown that the course of income inequality of a US cohort in
retirement depends on the inequality measure used. For example, the variance of
logarithmic income, a bottom sensitive measure, displays a decidedly declining
trend. This study examines the mechanisms that underlie these income inequality
changes as a cohort enters their retirement years using longitudinal data over a 20-
year period and a variety of methods. In particular, individual income trajectories
and income instability just before and in retirement are investigated. The results
show (i) the variance of logarithmic income falls as the cohort ages primarily due to
a reduction in income instability; (ii) on average, the rich and poor get poorer as
they age into retirement; and (iii) consistent with previous research, a person’s place
in the retirement income distribution is largely determined before retirement.