Retirement saving plays an important role in the U.S. economy. Americans hold more than $18 trillion in private retirement accounts like 401(k)s and IRAs, while defined benefit pensions in the private and public sector hold trillions more. Social Security and Medicare comprise nearly 40 percent of the federal budget. The government also provides tax subsidies for retirement saving, and funds Medicaid, which covers elder long-term care. Yet despite existing research, policymakers do not have access to reliable data when making decisions that affect the retirement security of tens of millions of families. There are many major outstanding questions:

• How well are households preparing for retirement?
• Why does consumption fall at retirement? Does this indicate that retirees aren’t saving enough, or does it reflect their ability to secure the same quality of life with fewer expenditures?
• Do tax-based saving incentives raise net wealth accumulation?
• What policies boost saving? Would improving financial literacy or mandating saving be effective? Are there retirement saving programs that raise participation and increase overall wealth accumulation?
• Why do households consistently make retirement financing decisions that do not appear to be in their own best interest?

Obtaining better answers to these questions and using the insights they provide to guide changes in the American retirement system could improve living standards for generations of retirees and control the federal budget. But to obtain these answers, researchers and policy makers need better information— that is, more than access to more comprehensive data. They must also employ better study designs. In the absence of such robust studies, it hardly surprising that almost no retirement policymaking is rooted in evidence; programs simply continue indefinitely with little or no Congressional oversight. Federal tax expenditures for retirement saving—which totaled $252 billion in 2018—have never been formally evaluated, while the Social Security Administration devotes less than 1 percent of its administrative budget to research and evaluation.
Making effective evidence-based policy requires both a comprehensive understanding of the policy challenge and attendant remedies, as well as the will and ability to implement the necessary reforms. The federal government should commission a large-scale panel survey that, coupled with linked administrative data, provides detailed information on household wealth, labor market, health and demographic data. No current data set provides such information.
You can find the full Retirement Security Project at Brookings paper here.

AARP reports thatAmericans are concerned and even afraid for their retirement security. And the news headlines often don’t make them feel better. The latest is a claim from the National institute for Retirement Security that “A plurality of older Americans, 40.2 percent, only receive income from Social Security in retirement.” If true that’s very worrying. But does this frightening factoid hold up?

The NIRS report’s data source is the Census Bureau’s Survey of Income and Program Participation (the SIPP). The SIPP surveys households by asking them a wide variety of questions, including the sources of their income. From the SIPP, NIRS declares that 40.2 percent of retirees receive all of their income from Social Security.

And yet, a 2017 study by researchers at the Social Security Administration, also using the SIPP, found that only 19.6% of Americans 65 and over received at least 90% of their total incomes from Social Security. That’s less than half the share of retirees than NIRS claims and SSA measures dependence using a lower bar—90% of total income rather than NIRS’s 100%. Clearly, there’s a conflict.

Moreover, a second 2017 study, from two Census Bureau economists, analyzed retirement incomes using IRS tax records, which are more accurate than households’ responses to a survey. The Census Bureau study found that only 12% of Americans aged 65+ received 90% or more of their income from Social Security. Again, it’s not clear how that is compatible with NIRS’s claim that over 40% of retirees receive all their income from Social Security.
From a policy perspective, one-fifth of retirees being heavily dependent on Social Security isn’t a huge problem: the poorest fifth of workers are indeed quite poor, and Social Security was designed to provide a retirement benefit for workers who can’t easily save on their own.
You can find the full article, including a discussion of why the NIRS data might be wrong, here.

According to AARP, one in 3 Tennesseans 67 and older are living on Social Security alone. To find out about poverty and the elderly learn more here.