Friday, January 24, 2014

US Government Grossly Understating Seniors' Retirement Income To Justify Expansion Of Social Security

From The Wall Street Journal, "Biggs and Schieber: Retirees Aren't Headed for the Poor House: The most commonly cited measure of retirement income ignores at least 60% of the money that seniors receive." by Sylvester J. Schieber and Andrew G. Biggs:
Data from the Current Population Survey, or CPS, form the basis of the Social Security Administration's Income of the Aged publication series—which is widely cited as showing that Americans' inadequate retirement incomes force them to increasingly rely on Social Security benefits. But the CPS fails to count most of the income Americans derive from 401(k) and IRA plans, as well as significantly understating the percentage of current American workers who are saving for retirement.

.... The Census Bureau's definition of income, however, includes only payments made on a regular, periodic basis. So monthly benefits paid from a defined benefit pension or an annuity are counted as income, while as-needed withdrawals from 401(k)s or IRAs are not.
For 2008, the CPS reported $5.6 billion in individual IRA income. Retirees themselves reported $111 billion in IRA income to the Internal Revenue Service. The CPS suggests that in 2008 households receiving Social Security benefits collected $222 billion in pensions or annuity income. But federal tax filings for 2008 show that these same households received $457 billion of pension or annuity income.
The Social Security Administration has used the Census survey for the last 40 years to report the income status of the elderly. The agency has known for nearly 20 years that CPS data ignored much of the retirement income paid out by pensions and IRAs, and that the underreporting of this income was a growing problem.
Nevertheless, Social Security Administration summary reports developed from CPS data continue to be published. They are widely cited as justification for expanding Social Security and shifting away from the 401(k) and IRA saving system that today produces more income for retirees than does Social Security.

No comments:

Post a Comment