There's something fishy in the Current Population Survey's income data for older Americans, and now we know what it is. The percentage of people aged 65 or older who report receiving income from an IRA or 401(k) is way too low--just 1 percent in 2010! An article in Social Security Bulletin explains why: the CPS does not count IRA/401(k) withdrawals as income unless they occur regularly--such as with an annuity. But most IRA/401(k) withdrawals are irregular and thus not counted. You don't have to be a data junkie to find this omission astounding--especially from the survey that generates the nation's official income statistics.
The Social Security Bulletin article provides a glimpse of the magnitude of the omission by comparing IRA income recorded by the CPS to IRA income reported to the IRS. The difference is eye popping: $6.4 billion (CPS) versus $124.7 billion (IRS). The CPS is missing, from IRAs alone, an average of $2,333 per person aged 60 or older in the United States.
Because a growing share of retirement income is in the form of irregular withdrawals from IRAs and 401(k)s, the researchers conclude: "The major nationally representative surveys of household income must accurately measure annual distributions from retirement accounts in order to provide a complete picture of the economic well-being of the aged and the general US population."
Source: Social Security Administration, Shifting Income Sources of the Aged, Chris E. Anguelov, Howard M. Iams, and Patrick J. Purcell, Social Security Bulletin, Vol. 72, No. 3, 2012
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