Capital Income Flows and the Relative Well-Being of America's Aged Population

59 Pages Posted: 9 Nov 2008

See all articles by Barry Bosworth

Barry Bosworth

Brookings Institution - Economic Studies Program

Gary Burtless

Brookings Institution; Boston College - Retirement Research Center

Sarah Anders

Brookings Institution

Multiple version iconThere are 2 versions of this paper

Date Written: December 1, 2007

Abstract

One way to assess the effectiveness of a nation's pension system is to measure its success in bringing the incomes of the aged close to those enjoyed by the nonaged. The comparability of income estimates for the aged and nonaged depends, however, on the relative accuracy of the income reports for the two populations. Unfortunately, some income items that are particularly important to the elderly, including occupational pensions, income derived from financial assets, and returns on homeowners' net equity in their principal residence, are either unreported or significantly underreported in household surveys. In this paper we assess the effects of unmeasured and underreported income flows on the relative incomes of the aged and near-aged. We use survey data from the March Current Population Survey and the Survey of Consumer Finances. The latter survey contains information on wealth holdings as well as income. Using our broadest definition of income, which includes the return on net equity in an owner-occupied home and the predicted annuity flow from a household's financial assets, the incomes of aged households in the middle of the old-age income distribution appear to be similar to those of nonaged households in the middle of the nonaged income distribution. In the top and bottom one-quarter of the old-age income distribution, incomes under the broadest income definition are substantially higher than those of nonaged households in the equivalent position of the income distribution. This income pattern diverges sharply from the one that would be inferred under the Census Bureau's standard money income definition, which shows that aged households have noticeably lower incomes than the nonaged.

Suggested Citation

Bosworth, Barry and Burtless, Gary T and Anders, Sarah, Capital Income Flows and the Relative Well-Being of America's Aged Population (December 1, 2007). Available at SSRN: https://ssrn.com/abstract=1296659 or http://dx.doi.org/10.2139/ssrn.1296659

Barry Bosworth (Contact Author)

Brookings Institution - Economic Studies Program ( email )

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Gary T Burtless

Brookings Institution ( email )

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Economic Studies Program
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HOME PAGE: http://https://www.brookings.edu/experts/gary-burtless/

Boston College - Retirement Research Center ( email )

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Sarah Anders

Brookings Institution ( email )

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

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