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Key Findings Details

Cohort Changes in Social Security Benefits and Pension Wealth
Chichun Fang, Charles Brown and David Weir
WP 2016-350

  • The near-elderly population in the most recent cohort is not as financially prepared for retirement as their peers in earlier cohorts. In relative terms, retirement wealth does not grow as fast as lifetime earnings; in absolute terms, retirement wealth declines among men and minorities since the turn of the century.
  • There has been a stable shift from defined benefit (DB) plans to nonannuitized retirement wealth such as defined contributions (DC) or individual retirement accounts (IRA). The increase in DC and IRA was not enough to make up the loss in DB, which was reflected in the decline in retirement wealth. As a result, the proportion of Social Security benefits in total retirement wealth was increasing, especially among minorities.
  • The HRS used different earnings projection methods to produce Social Security and pension wealth estimates. The earnings projection in Social Security wealth estimation requires administrative data linkage, but performs reasonably well for those who stay in the same job in 2010. The earnings projection in pension wealth does not require data linkage and is easier to implement, but pension wealth estimates in 2004 were affected by larger errors in earnings projection for the same group of respondents.