August 27, 2012 (PLANSPONSOR.com) - A report published by the Social Security Administration (SSA) contends the Census Bureau should adapt its retirement income measures to the changing retirement landscape.
According to “Shifting Income Sources of the Aged,” the Census Bureau’s Current Population Survey (CPS)—one of the primary sources of income data—greatly underreports distributions from defined contribution (DC) plans and individual retirement accounts (IRAs), posing an increasing problem for measuring retirement income in the future. While the CPS shows current retirees still receive significant retirement income from defined benefit (DB) plans, the data also indicated DC and IRA balances for those not retired is increasing.
The CPS measures IRA distributions as money income if they occur “regularly,” like annuity payments. However, because most IRA distributions are irregular, they are not measured as income in the CPS, the report says. In addition, very few DC plan participants take their retirement distributions as annuities. Excluding periodic (irregular) distributions misses much of the money distributed from IRAs and DC plans that supports retirement consumption. As retirees increasingly rely on periodic distributions from DC plans and IRAs, the problem of underreporting pension income in the CPS could become increasingly serious, the report authors contend.