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Pension wealth plays a critical role in older individuals’ retirement behavior and financial security. Accordingly, the magnitude and distribution of pension wealth is important in the ongoing debate about whether households, especially Baby Boomers, have saved adequately for retirement. This chapter summarizes the results of a long-term effort to develop an improved calculator to measure defined contribution pension wealth of older Americans. We implement the approach to construct alternative estimates of DC plan balances for Health and Retirement Study (HRS) participants. We find that pension wealth resulting from voluntary saving (and accrued earnings thereon) comprises half of DC pension wealth calculated for HRS respondents with matched summary plan descriptions. We also find lower mean estimates of DC pension wealth than prior estimates. Much of this reduction in estimated DC wealth occurs for the wealthiest tail of the pension-wealth distribution. Our findings imply that researchers must think more carefully about the economic assumptions underlying pension measures.
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All findings, interpretations, and conclusions of this paper represent the views of the authors and not those of the Wharton School or the Pension Research Council. © 2006 Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.
All research with the restricted-access data from the Health and Retirement Study was performed under agreement in the Center for Policy Research at Syracuse University, Federal Reserve Bank of Dallas, and Federal Reserve Bank of Atlanta. The authors are especially grateful to Bob Petticolas and Helena Stolyarova for their efforts in helping them understand the HRS employer-provided pension plan data. This research is part of a long-term effort to better measure pension wealth in the HRS and has received generous support from Syracuse University, TIAA-CREF, Social Security Administration through the Center for Retirement Research at Boston College, the US Department of Labor, the National Science Foundation, and the National Institute on Aging.
Date Posted: 28 August 2019