Mismeasurement of pensions before and after retirement: the mystery of the disappearing pensions with implications for the importance of Social Security as a source of retirement support

TitleMismeasurement of pensions before and after retirement: the mystery of the disappearing pensions with implications for the importance of Social Security as a source of retirement support
Publication TypeJournal Article
Year of Publication2014
AuthorsGustman, AL, Steinmeier, TL, Tabatabai, N
JournalJournal of Pension Economics and Finance
Volume13
Issue1
Pagination1-26
KeywordsNet Worth and Assets, Pensions, Public Policy, Retirement Planning and Satisfaction, Social Security
Abstract

A review of the literature suggests that when pension values are measured by the wealth equivalent of promised defined benefit pension benefits and defined contribution balances for those approaching retirement, pensions account for more support in retirement than is suggested when their contribution is measured by incomes received directly from pension plans by those who have already retired. Estimates from the Health and Retirement Study for respondents in their early fifties suggest that pension wealth is about 82 as valuable as Social Security wealth. In data from the Current Population Survey (CPS), for members of the same cohort, measured when they are 65-69, pension incomes are about 58 as valuable as incomes from Social Security. Our empirical analysis uses data from the HRS to examine the reasons for these differences in the contributions of pensions as measured in income and wealth data. Key factors accounting for these differences include: a difference in methodology between surveys affecting what is included in pension income; some pension wealth 'disappears' at retirement because respondents change their pension into other forms that are not counted as pension income; and the form of annuitization may influence the measure of pension income. A series of caveats notwithstanding, the bottom line is that CPS data on pension incomes received in retirement understates the full contribution pensions make to supporting retirees. PUBLICATION ABSTRACT

Endnote Keywords

pensions/retirement planning/Public Policy/social security wealth/wealth/Defined benefit plans/Defined contribution pension plans/pension income

Endnote ID

69340

Citation Key7987