Examining the New Income Measures in the Current Population Survey
16 Pages Posted: 30 May 2015
Date Written: May 2015
The U.S. Census Bureau’s Current Population Survey (CPS) is a primary source of income data for those whose ages are associated with being retired. In response to research showing that the survey has misclassified and underreported certain types of income, the 2014 CPS included a redesigned set of questions aimed at better capturing income from individual retirement accounts (IRAs) and 401(k)-type plans, among other goals. This paper provides a comparison of the income levels from the redesigned questions with those from the traditional questions. The focus in this paper is on the income of those ages 65 or older and on the income categories associated with retiree income to see the impact of the changes in the questions on sources of income in retirement. Particular emphasis is given to the income from individual retirement accounts (IRAs) and 401(k)-type plans, as this appears to be the income type with the most underreporting, given the lump-sum nature of the payments typically found from these plans, instead of regular annuity payments traditionally received from pensions. This analysis finds the new measure of income in the CPS identifies significantly more income (and a much larger percentage of income) coming from IRAs and 401(k)-type plans. Compared with the estimated amount under the traditional-income questions for 2013, the redesigned questions have resulted in an estimated total annual income 9.1 percent larger for those ages 65 or older, an aggregate amount of almost an additional $133 billion. Retirement income is 27.9 percent larger, an aggregate difference of almost $71 billion. However, Social Security remains the overwhelmingly predominant source of income for those ages 65 or older. The redesigned CPS still finds that over 60 percent of individuals in the two lowest-income quartiles receive more than 90 percent of their total income from Social Security.
Note: The PDF for the above title, published in the May 2015 issue of EBRI Notes, also contains the full text of another May 2015 EBRI Notes article abstracted on SSRN: “Characteristics of the Population With Consumer-Driven and High-Deductible Health Plans, 2005-2014.”
Keywords: 401(k)-type plans, Aged, Annuities, Current Population Survey (CPS), Employment-based benefits, Individual retirement accounts (IRAs), Pension plans, Retirement income, Social Security benefits, Wealth
JEL Classification: D31, J14, J26, J33
Suggested Citation: Suggested Citation