Americans who report more than $200,000 in annual adjusted gross income may also skimp on retirement savings when the economy tanks.
Justin Bryan, an economist at the Internal Revenue Service (IRS), has written about the latest data on “high-income tax returns” in an article published in the the latest IRS Statistics of Income Bulletin.
Bryan presents data from 2008, when the recession had just started to roll in and many individuals had started out thinking they were having a good year.
In 2010, Bryan wrote a similar article based on 2007 high-income tax return data.
The number of taxpayers reporting $200,000 or more in adjusted gross income fell 3.5% between 2007 and 2008, to 4.4 million, and, mainly because of a 45% drop in income from sales of capital assets, those taxpayers’ total income fell 14%, to $2.5 trillion.
Many of the high-earners might have been ineligible to contribute to individual retirement accounts (IRAs) or Keogh self-employed retirement plans, and their eligibility status may have changed between 2007 and 2008.
But the amount they contributed to the plans amounted was just $13 billion in 2008. High earners reduced their plan contributes 12% between 2007 and 2008, even though contributions amounted to just 0.5% of their taxable income.
Pension and annuity income was one source of income stability for high earners. Their pension and annuity income fell just 3%, to about $44 billion.