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Encore: Yes, it’s true: Older people depend on Social Security

For a long time, the Social Security Administration has put out studies appearing the proportion of family income due to Social Security.

In contemporary years, some analysts have criticized the reliance of these estimates on data from the Current Population Survey, or CPS. Studies have proven that the CPS was once underreporting income from each explained benefit and defined-contribution plans. To the level that the survey underreports pension income, it will overstate the significance of Social Security. Candidly, because of this concern, I've shied away from the usage of these statistics within the ultimate couple of years.

Fortunately, three researchers from the Social Security Administration have produced a complete study that clarifies the function of Social Security via drawing data from three separate family surveys. One survey is the CPS, which was once considerably redesigned in 2014-2015 in order that it now comprises separate questions about retirement-income account withdrawals and distributions. Comparing the results of the redesigned CPS to earlier years displays that the superiority and aggregate value of retirement income rather then Social Security were about 50% and 22% higher, respectively.

The 2d survey is the Health and Retirement Study, or HRS, probably the most complete longitudinal study for Americans ages 51 and older. The HRS can be linked to verifiable administrative knowledge on Social Security advantages and gives complete knowledge on retirement plan account balances and distributions from defined-benefit plans.

To regulate for the truth that the HRS income measure does not come with withdrawals from 401(k) or IRA plans, the researchers assumed that those over age 70½ took the Internal Revenue Service’s required minimum distribution and made related estimates for the years 65 to 70½.

The third survey is the Survey of Income and Program Participation, or SIPP. The SIPP members can also be linked to Social Security administrative data, and this survey comprises distributions from each explained benefit and defined-contribution plans in its measure of income.

The determine beneath displays the effects from all three surveys for the proportion of families depending on Social Security for 90% and 50% of their retirement income. The effects are remarkably an identical throughout surveys.

The subsequent determine makes use of the CPS to show how the dependence varies via income. For the first three fifths of the income distribution, the overwhelming majority depend on Social Security for more than half of their retirement income.

Hopefully, this complete analysis will put the statistical debate to relaxation. Social Security is a very important supply of retirement income and that must be recognized in any debate about the program’s long run.