Trends in Retirement Income Adequacy: Evidence from IRS Tax Data
Concerns that Americans are not saving enough for retirement, and that this problem is getting worse over time, are common. For example, Munnell, Hou, and Sanzenbacher (2018) estimate that the fraction of working-age American households that will have inadequate income in retirement to maintain their pre-retirement standard of living has grown from 31% in 1983 to 40% in 1998 to 50% in 2016. The alleged decline in economic security in retirement has been attributed to declines in the personal savings rate, the prevalence of defined benefit pensions, and the real interest rate. On the other hand, Biggs (2019) argues that there is no retirement savings crisis. Among other things, he points out that over time, the over-65 poverty rate has fallen and median income in retirement has risen.
In this paper, we examine trends in retirement income across the 1930-1941 birth
cohorts using a 5% random sample from IRS tax data, comprising 22.6 million personyears. An advantage of our analysis is that we do not rely upon survey reports of income, whose accuracy has been a subject of concern (e.g., Bee and Mitchell, 2017; Chen, Munnell, and Sanzenbacher, 2018).
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