Contribution of Pension and Retirement Savings to Retirement Income Security: More Than Meets the Eye

Abstract

Recently, much concern has been expressed about the U.S. retirement system. Social Security is underfunded, while supplemental plans reportedly provide benefits half only that of Social Security and have gained little ground over the last 40 years. The shift to defined contribution plans is often seen as problematic. Some analysts suggest scrapping tax preferences for retirement plans and expanding Social Security. Much evidence that supplemental plans are coming up short on enhancing retirement security comes from the Current Population Survey (CPS). The analysis here shows that most income from retirement plans is not captured by the CPS or the Social Security reports developed using it. Ignoring retirees’ growing private retirement savings and income distorts the role played by private pensions, resulting in inaccurate assessments of retirees’ economic status. This error may bias policymakers’ judgment as to the right policies for an aging population and underfunded pensions. <b>TOPICS:</b>Retirement, legal/regulatory/public policy