Most American workers maintain or increase their spendable income after claiming Social Security, according to a new analysis of tax data by Investment Company Institute economists.
In their research, ICI economists Peter Brady, Steven Bass, Jessica Holland and Kevin Pierce analyzed tax data from 1999 to 2010, and found that the median worker replaced 103% of spendable income after claiming Social Security.
For most individuals, both Social Security benefits and retirement income — from employer-sponsored retirement plans, annuities or IRAs — provide substantial income.
Social Security, however, is relatively more important for lower-income individuals, retirement income matters more to higher-income individuals, and those in the middle receive a similar amount of income from both sources.
“The vast majority of workers we analyzed reported retirement resources other than Social Security,” Brady said in a statement announcing the study’s findings.
“Indeed, 89% of individuals held or drew income from employer plans, annuities and IRAs. These results suggest that a much higher share of retirees get income from these sources than reported in government surveys, and adds to the mounting evidence that household survey data understate retiree income.”
By looking at what tax filers, employers and financial institutions actually report to the IRS, Brady continued, “we are able to paint a more accurate picture.”
Of the 89% of individuals who had non-Social Security retirement resources, 81% received income, either directly or through a spouse, from employer plans, annuities or IRAs.