These types of figures are common, and lend support to the idea that Americans haven’t saved enough, that 401(k)s don’t work, that retirees have little other than Social Security to live on. And that things are only getting worse.
But what if I told you that all these claims are wrong? In fact, retirement incomes are increasing, the typical retiree today is less dependent on Social Security benefits than in the past, and rising private retirement saving is the reason. Data that accurately capture IRA and 401(k) withdrawals show rapidly rising incomes and high "replacement rates" for many types of retiree households.
Here’s the story. The SSA’s figures on retirement incomes – the figures that many media reports rely upon – come from the Current Population Survey (CPS), which is designed by the Bureau of Labor Statistics. The CPS is the source of official statistics on unemployment, poverty and more. In theory, the CPS measures the different sources of income that retirees rely upon.
The problem is what the CPS counts as “income.” In the CPS, money is counted as income only if it’s received on a regular basis – say, every week or every month. If you receive money only irregularly, it’s not counted as income.