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The WSJ Says the Elderly Are Rich But We Didn't Know It (see correction)

Sylvester Scheiber and Andrew Biggs have good news for us in a Wall Street Journal column, apparently the elderly are much better off than we realized.  Scheiber, a pension consultant and former chairman of the Social Security Advisory Board, and Biggs, an economist at the American Enterprise Institute and former Deputy Commissioner of the Social Security Administration, tell readers that the standard numbers on income for the elderly are way off.

The most commonly used measures of income are from the Census Bureau's Current Population Survey CPS). Scheiber and Biggs say that this survey misses a large portion of the income of retirees. For example, they tell readers:


"For 2008, the CPS reported $5.6 billion in individual IRA income. Retirees themselves reported $111 billion in IRA income to the Internal Revenue Service. The CPS suggests that in 2008 households receiving Social Security benefits collected $222 billion in pensions or annuity income. But federal tax filings for 2008 show that these same households received $457 billion of pension or annuity income.

"In combined terms, the Current Population Survey that ostensibly documents how poorly pensions and individual retirement plans provide retirement income ignores at least 60% of the income being delivered to retirees. Even that is not the whole story—because tax filings do not include distributions from Roth plans, since those distributions are not taxable."

Scheiber and Biggs go on to complain about the use of the CPS to assess retiree income and suggest alternative sources which they say would be more accurate.

This is an interesting argument. It is certainly newsworthy when someone finds major flaws in the most widely used survey for measuring income. However before we join Scheiber and Biggs in demanding that the Social Security Administration and other official bodies discard the data from the CPS, we may want to think this one over a bit.

There is one major problem with the Scheiber-Biggs story: the CPS is not the only data set that gives us these sorts of numbers about the income of the elderly. The Census Bureau has a totally separate survey, the Survey on Income and Program Participation (SIPP) that yields largely similar numbers to the CPS.

Dean Baker / January 24, 2014