Concepts and Measures of Earnings Replacement During Retirement
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NBER Working Paper No. 1360 (Also Reprint No. r0885)
Issued in July 1987
NBER Program(s): PE
This paper compares the well-being of the Retirement History Survey of the elderly with their own previous levels of income and economic welfare. Traditional replacement rates are calculated, although a number of shortcomings of such measures are discussed. Modifications are made by examining career average rather than peak earnings, by adjusting for the fact that the incomes of the elderly are taxed more lightly, that the elderly do not have dependent children, and that Social Security income in retirement is a safer source ofincome than earnings earlier in life. The fully adjusted total income measures are at least as high for almost all classes of households in the survey as their career average pre-retirement earnings.
Published: Bodie, Z., J.B. Shoven and D.A. Wise (eds.) Issues in Pension Economics. Chicago: University of Chicago Press, 1987.
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