Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36 Page 37 Page 38 Page 39 Page 40 Page 41 Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58 Page 59 Page 60 Page 61 Page 62 Page 63 Page 64 Page 65 Page 66 Page 67 Page 68 Page 69 Page 70 Page 71 Page 72 Page 73 Page 74 Page 75 Page 76 Page 77 Page 78 Page 79 Page 80 Page 81 Page 82 Page 83 Page 84 Page 85 Page 86 Page 87 Page 88 Page 89 Page 90 Page 91 Page 92 Page 93 Page 94 Page 95 Page 96 Page 97 Page 98 Page 99 Page 100 Page 101 Page 102 Page 103 Page 104 Page 105 Page 106 Page 107 Page 10856 CHAPTER 3: income & wealth Americans have been raised to believe it is unseemly—if not risky—to discuss money and wealth. Such attitudes about money and disclosing personal information have made it difficult for researchers to study these variables with confidence. The Health and Retirement Study (HRS) was designed to overcome many traditional survey obstacles by building the trust of participants and by using innovative data collection strategies that capture valuable information from participants with imperfect knowledge or who are unwilling to provide precise figures, while at the same time protecting participants’ confidentiality. Not only has the HRS broken new ground in terms of how data are collected, but its blend of economic, health, and social variables also affords researchers unprecedented possibilities to study increasingly complex questions about the retirement transition. These detailed characterizations of income and wealth over time are hallmarks of the HRS. With looming changes in Social Security and private pension plans, plus dramatic turns in recent years in the stock and housing markets, HRS data can provide critically important insights into the pending retirement of the baby boom. For income alone, for example, scientists can look at trends in income distribution and composition; income differences from one generation to the next; patterns of income as individuals age; changes in income as people experience retirement, widowhood, and health events; and income variations across occupations and employers. This chapter examines the topics of income and wealth among older Americans as they prepare for and transition into retirement. It discusses HRS participants’ levels and sources of income, the relationship of health to income and wealth, pre-retirement saving behavior, wealth and its distribution among subgroups of older Americans, the role of pension plans, and housing equity. total income over their lifetimes, the variance in retirement wealth is large. For most households, the value of one’s home is the most important part of their wealth. Many Americans save little—or nothing—for retirement. In 1996, HRS respondents saved roughly 3 percent of their median 10-year income in the decade prior, and more than one- third of HRS participants said they have saved nothing for retirement. Nearly three-fourths felt they had not saved enough and said they would save more if they had it to do over again. Only a third of those working said they planned to save more. Those in poor health who were nearing retirement were less likely to save for retirement. income group to about $120,000 in the highest income group among people age 85 and older. Social Security benefits provide more income than any other source for more than 60 percent of households whose members are age 65 or older. Variations in wealth among older Americans are even more striking than variations in income. Married people in the lowest fifth of the wealth distribution have little wealth to speak of, while the poorest 20 percent of unmarried individu- als have negative net worth. This contrasts with married and unmarried households in the high- est fifth, averaging $1.5 million and $800,000. However, even among people with the same Chapter Highlights The HRS data provide evidence that there are immense differences in income and wealth among older Americans. Further, the components of in- come and wealth among households vary greatly, and the correlations between financial well-being and marital and health status are very strong. There are enormous variations in income among Americans over age 50. For people ages 55 to 64, average income in married households ranges from about $20,000 among the poorest fifth of households to more than $200,000 among the highest income group (in 2002). Average income levels are much lower in older households, ranging from $13,000 in the lowest