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February, 2001, Vol. 124, No. 2

Pension integration and retirement benefits

Keith A. Bender

The issue of retiree income is important in a time of proposed Social Security reform. In 1996, for example, the shares of aggregate income for those aged 65 or older were, on average, 40.3 percent from Social Security, 18.5 percent from employer pensions, 20 percent from employment, and 21.1 percent from assets and other forms of income.¹ Integration of pension income with Social Security income likely reduces benefits for many retirees, making research on income from integrated pensions critical.

Previous research creates hypothetical earnings histories to simulate the effect of integration on actual plans. In one such simulation, Avy Graham finds that integration decreases replacement rates for low earners and increases them for middle and high earners, compared with those with nonintegrated pensions.² By contrast, Keith Bender reports that recent survey data show only a slight correlation between higher replacement rates and higher income for integrated plans.³ The current article presents new evidence, using a combination of survey data on workers and on their actual pension plans.

This excerpt is from an article published in the February 2001 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.

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Footnotes

1 Income of the Population 55 or Older, 1996 (Social Security Administration, 1998), table VII.2.
2 Avy D. Graham, "Coordinating private pension benefits with Social Security," Monthly Labor Review, March 1994, pp. 35–38.
3 Keith A. Bender, "Characteristics of Individuals with Integrated Pensions," Social Security Bulletin, vol. 62, no. 3, 1999, pp. 4–14.

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