Retirement Income: Intergenerational Comparisons of Wealth and	 
Future Income (25-APR-03, GAO-03-429).				 
                                                                 
Today's workers will rely to a large extent on Social Security,  
private pensions, and personal wealth for their retirement	 
income. But some analysts question whether these sources will	 
provide sufficient retirement income to maintain workers'	 
standards of living once they leave the labor force. Indeed, the 
Social Security trust funds are projected to become exhausted in 
2042, at which time, unless action is taken, Social Security will
not be able to pay scheduled benefits in full. To gain an	 
understanding of what today's workers might expect to receive in 
terms of retirement income, GAO was asked to examine (1) how the 
personal wealth of Baby Boom (born between 1946 and 1964) and	 
Generation X (born between 1965 and 1976) workers compare with	 
what current retirees had at similar ages, (2) how workers from  
the Baby Boom and Generation X compare in terms of the pension	 
and Social Security benefits they can expect to receive, and (3) 
the likely distribution of pension and Social Security benefits  
across workers within the Baby Boom and Generation X.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-429 					        
    ACCNO:   A06729						        
  TITLE:     Retirement Income: Intergenerational Comparisons of      
Wealth and Future Income					 
     DATE:   04/25/2003 
  SUBJECT:   Comparative analysis				 
	     Financial analysis 				 
	     Income statistics					 
	     Projections					 
	     Retirement benefits				 
	     Retirement pensions				 
	     Social security benefits				 
	     Strategic planning 				 
	     Surveys						 
	     Wage surveys					 
	     Pension plan cost control				 
	     Social Security Program				 
	     Supplemental Security Income  Program		 
	     Medicare program					 

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GAO-03-429

Report to the Ranking Minority Member, Subcommittee on EmployerEmployee
Relations, Committee on Education and the Workforce, House of
Representatives

United States General Accounting Office

GAO

April 2003 RETIREMENT INCOME

Intergenerational Comparisons of Wealth and Future Income

GAO- 03- 429

Baby Boom and Generation X households headed by an individual aged 25 to
34 have greater accumulated assets, adjusted for inflation, than current
retirees had when they were the same age, but also more debt. Most of the
large increase in assets between current retirees and the Baby Boom is due
to increased ownership and equity in housing. Contributions to defined
contribution pension plans play a role in explaining the modest increase
in assets between the Baby Boom and Generation X, in part, because GAO*s
data do not allow it to consider the value of benefits from defined
benefit pension plans.

Workers from Generation X are estimated to have similar levels of
retirement income in real terms (adjusted for inflation) at age 62 as
their counterparts in the Baby Boom, but Generation X may be able to
replace a

smaller percentage of their preretirement income. Whether Social Security
benefits for Generation X are higher or lower than those for the Baby Boom
will depend on how the Social Security funding shortfall is resolved. With
regard to pensions, Generation X and the Baby Boom are estimated to have
similar levels of pension income even with a continued shift from defined
benefit to defined contribution pension coverage. Retirement income will
vary within both Generation X and the Baby Boom

households, and certain groups will be more likely to have lower
retirement incomes. As one might expect, given significant variation in
workers* earnings, if households were arrayed from lowest to highest in
terms of estimated total retirement income, those in the top 20 percent
would receive

a substantially larger proportion of income compared with those in the
bottom 20 percent. Retirement income is lower for the less educated and
single women.

Percentage of the Aged Receiving Income, by Source 020 40 60 80100
Earnings Government Pensions

Private Pensions Asset Income

Social Security Percentage of aged

2000 1962 Source: Fast Facts and Figures About Social Security, Social
Security Administration, 2002.

Source

69 90

54 59

9 29

9 14

36 22

Today*s workers will rely to a large extent on Social Security, private
pensions, and personal wealth for their retirement income. But some
analysts question whether these

sources will provide sufficient retirement income to maintain workers*
standards of living once they leave the labor force. Indeed,

the Social Security trust funds are projected to become exhausted in 2042,
at which time, unless action is taken, Social Security will not be able to
pay scheduled benefits in full.

To gain an understanding of what today*s workers might expect to receive
in terms of retirement income, GAO was asked to examine (1) how the
personal wealth of Baby Boom (born between 1946 and 1964) and Generation X
(born between 1965 and 1976) workers compare with what current retirees
had at similar ages, (2) how workers from the Baby Boom and Generation X
compare in terms of the pension and Social Security benefits they can
expect to receive, and (3) the

likely distribution of pension and Social Security benefits across workers
within the Baby Boom and Generation X. www. gao. gov/ cgi- bin/ getrpt?
GAO- 03- 429. To view the full report, including the scope

and methodology, click on the link above. For more information, contact
Barbara D. Bovbjerg at (202) 512- 7215. Highlights of GAO- 03- 429, a
report to

Ranking Minority Member, Subcommittee on Employer- Employee Relations,
Committee on Education and the

Workforce, House of Representatives

April 2003

RETIREMENT INCOME

Intergenerational Comparisons of Wealth and Future Income

Page i GAO- 03- 429 Retirement Income Letter 1 Results in Brief 3
Background 5 Baby Boom and Generation X Workers Have More Assets and More

Debt Than Current Retirees Had at Similar Ages 13 Generation X and the
Baby Boom Are Estimated to Have Similar Levels of Real Retirement Income,
but Generation X Could Have Lower Replacement Rates 22 The Distribution of
Retirement Income Will Vary within

Generations, and Certain Groups Will Be More Likely to Have Lower
Retirement Incomes 27 Concluding Observations 35 Agency Comments 36
Appendix I Scope and Methodology 38

Analysis of Personal Wealth 38 Analysis of Simulated Retirement Income 40
Appendix II Alternative Scenarios 52 Retirement Income Under the No-
Sunset Pension Scenario 52 Distributional Figures and Tables for the Baby
Boom and for

Generation X under Alternative Scenarios 54 Appendix III GAO Contacts and
Staff Acknowledgments 75 GAO Contacts 75 Staff Acknowledgments 75 Related
GAO Products 76

Tables

Table 1: The Median Value of Net Worth for Households Headed by a 25- to
34- Year Old* Differences by Homeownership, Marital Status, and Education
21 Table 2: Median Value of Wealth- to- Income Ratios for Households

Headed by a 25- to 34- Year Old* Differences by Homeownership, Marital
Status, and Education 22 Contents

Page ii GAO- 03- 429 Retirement Income

Table 3: Median Monthly Household Retirement Income and Its Major
Components, at Age 62, if Social Security Shortfall Addressed by
Increasing Revenues 24 Table 4: Median Monthly Household Retirement Income
and Its

Major Components, at Age 62, if Social Security Shortfall Addressed by
Reducing Benefits 24 Table 5: Median Monthly Household Retirement Income
and Its

Major Components, at Age 62, if Social Security Shortfall Addressed by
Reducing Benefits and Generation X Having Only DC Pension Plans 26 Table
6: Median Household Replacement Rates for Baby Boom and

Generation X 27 Table 7: Median Monthly Household Retirement Income at Age
62 by Marital Status for Generation X, in 2001 Dollars 34 Table 8:
Participation Rates by Age and Salary, 2001 45 Table 9: Contribution Rates
by Age and Salary, 1999 45 Table 10: Average Asset Allocation Rates by Age
and Investment

Options, 2000 46 Table 11: Assets at Termination, 2000 46 Table 12: Median
Monthly Household Retirement Income and its Major Components, at Age 62,
if Social Security Shortfall Addressed by Increasing Revenues 52 Table 13:
Median Monthly Household Retirement Income and its

Major Components, at Age 62, if Social Security Shortfall addressed by
Reducing Benefits 53 Table 14: Median Monthly Household Retirement Income
and its

Major Components, at Age 62, if Social Security Shortfall Addressed by
Reducing Benefits and Generation X Having Only DC Pension Plans 53 Table
15: Median Household Replacement Rates for Baby Boom

and Generation X 54 Table 16: Median Monthly Household Retirement Income
at Age 62 by Marital Status for the Baby Boom, in 2001 Dollars 59 Table
17: Median Monthly Household Retirement Income at Age 62 by Marital Status
for Generation X When All Pensions are DC Pensions, in 2001 Dollars 64
Table 18: Median Monthly Household Retirement Income at Age 62

by Marital Status for Generation X with Extension of Raised Pension
Contribution Limits, in 2001 Dollars 69 Table 19: Median Monthly Household
Retirement Income at Age 62

by Marital Status for Generation X with Scheduled Social Security
Benefits, in 2001 Dollars 74

Page iii GAO- 03- 429 Retirement Income Figures

Figure 1: Percentage of the Aged Receiving Income, by Source 6 Figure 2:
Average Weekly Earnings for Production or Nonsupervisory Workers, Adjusted
for Inflation 8 Figure 3: Labor Force Participation Rates of Married Women
9 Figure 4: Estimated Private Wage and Salary Worker Participation

Rates Under DB and DC Pension Plans 10 Figure 5: Levels of Education
Completed by Individuals Age 25 and Over 11 Figure 6: Percentage of
Households by Household Composition 12 Figure 7: Median Value of Total
Assets, Retirement Accounts, and

Housing Assets, and the Percentage of Households with these Assets for
Households Headed by a 25- to 34- YearOld 15 Figure 8: Median Value of
Total Assets, Financial Assets, and

Nonfinancial Assets, and the Percentage of Households with These Assets
for Households Headed by a 25- to 34- Year Old 17 Figure 9: Median Value
of Debt and the Percentage of Households

with Debt for Households Headed by a 25- to 34- Year Old (Total Debt,
Housing Debt, Financial Debt, and Other Debt) 19 Figure 10: Median Value
of Positive and Negative Net Worth and

the Percentage of Households with Net Worth for Households Headed by a 25-
to 34- Year Old 20 Figure 11: Proportion of Household Retirement Income
for Each

Quintile of the Retirement Income Distribution at Age 62 for Generation X
29 Figure 12: Proportion of Household Pension Benefits and

Household Social Security Benefits for Each Quintile of the Pension
Benefit and Social Security Benefit Distributions at Age 62 for Generation
X 30 Figure 13: Median Monthly Household Retirement Income at Age

62 for Generation X by Pension Status 31 Figure 14: Median Monthly
Household Retirement Income at Age 62 by Educational Attainment for
Generation X 33 Figure 15: Median Monthly Retirement Income at Age 62 by
Gender for Single Person Households for Generation X 35

Page iv GAO- 03- 429 Retirement Income

Figure 16: Proportion of Household Retirement Income for Each Quintile of
the Retirement Income Distribution at Age 62 for the Baby Boom 55 Figure
17: Proportion of Household Pension Benefits and

Household Social Security Benefits for Each Quintile of the Pension
Benefit and Social Security Benefit Distributions at Age 62 for the Baby
Boom 56 Figure 18: Median Monthly Household Retirement Income at Age

62 by Pension Status for the Baby Boom 57 Figure 19: Median Monthly
Household Retirement Income at Age 62 by Educational Attainment for the
Baby Boom 58 Figure 20: Median Monthly Retirement Income at Age 62 by
Gender for Single Person Households for the Baby Boom 59 Figure 21:
Proportion of Household Retirement Income for Each Quintile of the
Retirement Income Distribution at Age 62 for Generation X When All
Pensions Are DC Pensions 60 Figure 22: Proportion of Household Pension
Benefits and

Household Social Security Benefits for Each Quintile of the Pension
Benefit and Social Security Benefit Distributions at Age 62 for Generation
X When all Pensions are DC Pensions 61 Figure 23: Median Monthly Household
Retirement Income at Age

62 by Pension Status for Generation X When All Pensions Are DC Pensions 62
Figure 24: Median Monthly Household Retirement Income at Age

62 by Educational Attainment for Generation X When All Pensions Are DC
Pensions 63 Figure 25: Median Monthly Retirement Income at Age 62 by
Gender

for Single Person Households for Generation X When All Pensions are DC
Pensions 64 Figure 26: Proportion of Household Retirement Income for Each

Quintile of the Retirement Income Distribution at Age 62 for Generation X
with Extension of Raised Pension Contribution Limits 65 Figure 27:
Proportion of Household Pension Benefits and

Household Social Security Benefits for Each Quintile of the Pension
Benefit and Social Security Benefit Distributions at Age 62 for Generation
X with Extension of Raised Pension Contribution Limits 66 Figure 28:
Median Monthly Household Retirement Income at Age

62 by Pension Status for Generation X with Extension of Raised Pension
Contribution Limits 67

Page v GAO- 03- 429 Retirement Income

Figure 29: Median Monthly Household Retirement Income at Age 62 by
Educational Attainment for Generation X with Extension of Raised Pension
Contribution Limits 68 Figure 30: Median Monthly Retirement Income at Age
62 by Gender

for Single Person Households for Generation X with Extension of Raised
Pension Contribution Limits 69 Figure 31: Proportion of Household
Retirement Income for Each

Quintile of the Retirement Income Distribution at Age 62 for Generation X
with Scheduled Social Security Benefits 70 Figure 32: Proportion of
Household Pension Benefits and

Household Social Security Benefits for Each Quintile of the Pension
Benefit and Social Security Benefit Distributions at Age 62 for Generation
X with Scheduled Social Security Benefits 71 Figure 33: Median Monthly
Household Retirement Income at Age

62 by Pension Status for Generation X with Scheduled Social Security
Benefits 72 Figure 34: Median Monthly Household Retirement Income at Age

62 by Educational Attainment for Generation X with Scheduled Social
Security Benefits 73 Figure 35: Median Monthly Retirement Income at Age 62
by Gender

for Generation X for Single Person Households with Scheduled Social
Security Benefits 74

Page vi GAO- 03- 429 Retirement Income Abbreviations

DB defined benefit DC defined contribution EGTRRA Economic Growth and Tax
Relief Reconciliation Act of

2001 ERISA Employee Retirement Income Security Act of 1974 GEMINI Genuine
Microsimulation of Social Security and Accounts

IRA individual retirement account OASDI Old Age, Survivor and Disability
Insurance PENSIM Pension Simulator PIA primary insurance amount PSG Policy
Simulation Group PSID Panel Study of Income Dynamics SCF Survey of
Consumer Finances SIPP Survey of Income and Program Participation SSASIM
Social Security and Accounts Simulator SSI Supplemental Security Income

This is a work of the U. S. Government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. It may contain
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materials separately from GAO*s product.

Page 1 GAO- 03- 429 Retirement Income

April 25, 2003 The Honorable Robert Andrews Ranking Minority Member
Subcommittee on Employer- Employee Relations Committee on Education and
the Workforce

House of Representatives Dear Mr. Andrews: Today*s workers will rely to a
large extent on Social Security, private pensions, and personal wealth for
their retirement income. But some analysts question whether these sources
will provide sufficient retirement income to maintain workers* standards
of living once they leave the labor force. 1 Indeed, the Social Security
trust funds are projected to become exhausted in 2042, at which time,
unless action is taken, Social Security will not be able to pay scheduled
benefits in full. 2 Pension coverage has remained at about 50 percent of
the workforce for decades while the composition of that coverage has
shifted from defined benefit (DB) plans to defined contribution (DC)
plans. 3 As a result of this shift, an increasing share of the
responsibility for providing for one*s retirement income has shifted from
the employer to the employee. Finally, workers today are saving a smaller
proportion of their incomes than earlier generations did. Yet, if current
workers are to maintain their standards of living and meet

increasing health care costs in retirement, they need to save more. 1 An
early assessment of the sufficiency of retirement income for the Baby Boom
was presented in a 1993 Congressional Budget Office study, Baby Boomers in
Retirement: An Early Perspective. 2 The projection of trust fund
exhaustion in 2042 is based on the intermediate assumptions of the Social
Security Administration*s Office of the Chief Actuary as presented in the
2003 Trustees Report. According to the same assumptions, annual costs will
exceed tax income for the Social Security trust funds starting in 2018.

3 In DB plans, the amount of the benefit received at retirement is defined
in advance by the plan*s benefit formula, which considers such factors as
salary and service. In a DC plan, it is the amount of the contribution
made by the employer, employee, or both, to the worker*s individual
account that is defined. Benefits in this type of plan are based largely
on the

amount contributed but are also affected by how this amount is invested.

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 03- 429 Retirement Income

These trends suggest that today*s younger workers might reach retirement
unable to maintain the standards of living they had achieved while
working. Additionally, there may be a greater strain on retirement assets
if younger workers spend more years in retirement due to greater life
expectancy. To gain an understanding of what today*s workers might expect
to receive in terms of retirement income, you asked us to examine (1) how
the wealth of Baby Boom and Generation X workers compares with what
current retirees (pre- Baby Boom generation) had as young adults, (2) how
workers from the Baby Boom and Generation X compare in terms of the
pension and Social Security benefits they can expect to receive, and (3)
the likely distribution of pension benefits and Social Security benefits
for all workers within the Baby Boom and Generation X. The Baby Boom
generation includes those born between 1946 and 1964, Generation X
includes those born between 1965 and 1976, and we define the Pre- Baby
Boom generation as those born between 1925 and 1945.

To compare wealth across all three generations, we used the Federal
Reserve Board*s Survey of Consumer Finances (SCF), a nationally
representative database containing detailed information on assets and
debt, and compared the ownership and median levels of different types of
assets and debt for 25- to 34- year olds in each generation. We selected
this age group because it is important to compare each of the generations
at the same life- cycle stage and this is the only age group for which we
have data on wealth for all three generations. 4 This comparison enabled
us to assess the extent to which the Baby Boom and Generation X have been
able to accumulate wealth, some or all of which can be used to finance
consumption in retirement. However, our wealth measure does not include
the future values of Social Security or pensions. 5 Therefore, to
complement our analysis of the younger generations* wealth, we simulated
future retirement income for the Baby Boom and Generation X. To illustrate
the levels and distribution of retirement income that current workers can
expect to receive at age 62, we used the Policy Simulation

4 Under the standard life- cycle theory of personal saving, people save
and accumulate wealth to smooth their standard of living over their
lifetime. Young adults entering the workforce tend to save less than older
workers in their peak earning years. The elderly

draw on their wealth in retirement. 5 For individuals covered by pension
plans, the SCF includes amounts accumulated under DC plans but does not
capture the expected value of future benefits under DB plans. The

SCF also does not capture the expected value of future Social Security
benefits.

Page 3 GAO- 03- 429 Retirement Income

Group*s (PSG) models 6 to simulate some components of retirement income*
Social Security benefits, pension income, and the earnings of spouses not
yet retired. Under contract to us, the PSG used Pension Simulator (PENSIM)
to estimate pension benefits and Genuine Microsimulation of Social
Security and Accounts (GEMINI) to estimate Social Security benefits for
two illustrative birth cohorts* Baby Boomers born in 1955 and Generation
Xers born in 1970. These simulations are based on the Social Security
Trustees* 2001 intermediate economic and actuarial assumptions. While our
simulations provide estimates of future retirement income, there is a
considerable amount of uncertainty involved with these estimates. Since
these estimates could change significantly, depending on assumptions used
and behavioral responses, they should not be considered predictions.

In order to bound our estimates of retirement income, we considered
different scenarios for Social Security and pensions. We used two
scenarios for estimating Social Security benefits: (1) scheduled benefits
are paid and (2) funded benefits are paid. 7 We also considered two
scenarios for pension benefits, one assuming that both the Baby Boom and
Generation X had the same DB and DC pension plan coverage and the other
that Generation X workers with pensions had only DC pensions. We compared
the two younger generations under these various scenarios because the
retirement income of these younger generations will be affected by policy
decisions on Social Security and pensions. Changes in Social Security and
pension benefits, in turn, will affect the amount that the Baby Boom and
Generation X need to save.

We conducted our work between April 2002 and April 2003 in accordance with
generally accepted government auditing standards. A more detailed
discussion of our scope and methodology appears in appendix I.

Baby Boom and Generation X households headed by individuals aged 25 to 34
have greater accumulated assets, adjusted for inflation, than current

6 The models* Social Security and Accounts Simulator, Genuine
Microsimulation of Social Security and Accounts, and Pension Simulator*
are described in appendix I. 7 While there are many ways of achieving the
same result, we chose to focus on the polar cases or bounds for change
within the current system. For additional information on the benchmarks,
see U. S. General Accounting Office, Social Security: Program*s Role in
Helping Ensure Income Adequacy, GAO- 02- 62 (Washington, D. C.: Nov. 30,
2001) and appendix I. Results in Brief

Page 4 GAO- 03- 429 Retirement Income

retirees had when they were the same age, but also more debt. Most of the
large increase in assets between current retirees and the Baby Boom is due
to increased ownership and equity in housing. Contributions to DC pension
plans play a role in explaining the modest increase in assets between the
Baby Boom and Generation X, in part because SCF data do not reflect the
value of future benefits from DB pension plans. Of the three groups,
members of Generation X carry the most debt. Yet, for Baby Boom and
Generation X households with positive net worth (assets exceed debt) at
age 25 to 34, net worth is 60 percent greater than that of current
retirees when they were the same age. However, particularly for Generation
X, greater life expectancy may require more assets to cover more years in
retirement and greater assets may also be required to support higher
standards of living. Additionally, within each generation, some people
will not do as well as others. Specifically, those who do not own their
home, are less educated, or are single, have less net worth.

Our simulations suggest that Generation X workers will have similar levels
of retirement income in real terms (adjusted for inflation) at age 62 as
their counterparts in the Baby Boom generation, but Generation X may be
able to replace a smaller percentage of their preretirement income.
Whether Social Security benefits for Generation X are higher or lower than
those for the Baby Boom generation will depend on how the Social Security
funding shortfall is resolved. If scheduled benefits were maintained by
increasing program revenues, then Generation X could receive higher Social
Security benefits in constant dollars than the Baby Boom generation, but
at the possible cost of higher taxes and a reduced capacity to save during
their working lives. If benefits were reduced to levels payable by current
payroll tax rates, then Generation X could

receive somewhat lower Social Security benefits than the Baby Boom
generation. With regard to pensions, Generation X and the Baby Boomers are
estimated to have similar levels of retirement income. A continued shift
from DB to DC pension coverage does not appear to have much effect on the
relative pension income of Generation X and the Baby Boom. With respect to
replacement rates, however, Generation X is estimated to be able to
replace a smaller percentage of preretirement income than the Baby Boom.
The lower replacement rates for Generation X might translate into a
decline in their standard of living at retirement, absent increases in
retirement income related to behavioral changes (e. g., increases in

savings, working longer), or external factors (e. g., increases in rates
of return on assets).

Retirement income will vary within both Generation X and the Baby Boom
generation and certain groups will be more likely to have lower retirement

Page 5 GAO- 03- 429 Retirement Income

incomes. As one might expect, given significant variation in workers*
earnings, if households were arrayed from lowest to highest in terms of
estimated retirement income, those in the top 20 percent would receive a
substantially larger proportion of income compared with those in the
bottom 20 percent. Retirement income is lower for the less educated and
for single women.

Retirement income in the United States includes Social Security benefits,
asset income, pension benefits, and earnings. Over the last 40 years,
receipt of Social Security has become almost universal while receipt of
asset income has increased modestly, receipt of private pensions has
tripled, and receipt of government pensions has increased by 50 percent.
However, a smaller proportion of aged households received earnings in 2000
than in 1962. (See fig. 1.) All of these components of retirement income
have been affected by the major regulatory, labor market, and demographic
changes that have taken place in the last 40 years. Background

Page 6 GAO- 03- 429 Retirement Income

Figure 1: Percentage of the Aged Receiving Income, by Source

Note: The aged include couples and nonmarried persons age 65 or older.

Legislative changes have expanded the pension and personal saving options
available to workers. 8 The Employee Retirement Income Security Act
(ERISA) of 1974 provided certain minimum standards and broad new
protections of employee benefits plans, including provisions for
individual retirement accounts (IRA). Subsequent legislation revised some
provisions

of ERISA, further expanding the possibilities for workers to have access
to pension income in retirement and established new types of
employersponsored pension plans, such as 401( k) plans.

Legislative changes have also focused on the financing problems of Social
Security. In the late 1970s and early 1980s, legislative action regarding

8 We have issued several reports on pension coverage and participation: U.
S. General Accounting Office, Private Pensions: Improving Worker Coverage
and Benefits, GAO- 02- 225 (Washington, D. C.: Apr. 9, 2002); Private
Pensions: Issues of Coverage and Increasing Contribution Limits for
Defined Contribution Plans, GAO- 01- 846 (Washington, D. C.: Sept. 17,
2001); Pension Plans: Characteristics of Persons in the Labor

Force Without Pension Coverage, GAO/ HEHS- 00- 131 (Washington, D. C.:
Aug. 22, 2000).

020 40 60 80100 Earnings Government Pensions

Private Pensions Asset Income

Social Security Percentage of aged

2000 1962 Source: Fast Facts and Figures About Social Security, Social
Security Administration, 2002.

Source

69 90

54 59

9 29

9 14

36 22

Page 7 GAO- 03- 429 Retirement Income

Social Security attempted to solve this financing problem by raising
taxes, curtailing future benefits, raising the retirement age, and trying
to increase work incentives. However, the financing of future Social
Security benefits is still an issue, and further action will need to be
taken to either increase the program*s revenues, decrease its
expenditures, or both.

The labor market conditions facing young workers today differ
significantly from those facing earlier generations of workers. Changes in
earnings, women*s labor force participation, and pension coverage over the
last 40 years have altered the context within which workers save for
retirement. Real earnings increased throughout the 1960s, slowed
considerably in the 1970s, remained relatively stagnant during the 1980s
and much of the 1990s, and may have started to rise in the late 1990s. For
some groups of workers, such as production or nonsupervisory workers,
average weekly earnings adjusted for inflation declined over most of the
time period following the early 1970s. (See fig. 2.) For young workers
facing stagnant or declining real earnings, saving for retirement might
have become more difficult than it was for those who entered the labor
market

when real earnings were growing.

Page 8 GAO- 03- 429 Retirement Income

Figure 2: Average Weekly Earnings for Production or Nonsupervisory
Workers, Adjusted for Inflation

In addition, over the last 40 years, more women have entered the labor
force. They entered regardless of their marital status* the labor force
participation rates of married women, for example, increased from 32
percent in 1960 to 61 percent in 1999. (See fig. 3.) This means a larger
share of women in younger cohorts is working and likely to qualify for
Social Security and pensions based on their own earnings. This also means
an increase in the share of married couple households that have two
earners, which could increase the potential for household retirement
saving.

Average weekly earnings in 1998 dollars

Source: Department of Labor, Bureau of Labor Statistics.

200 250

300 350

400 450

500 550

1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970
1968 1966 1964 1962 1960

Page 9 GAO- 03- 429 Retirement Income

Figure 3: Labor Force Participation Rates of Married Women

The composition of pension coverage also changed during this period. The
estimated share of private wage and salary workers participating in a DB
plan as their primary pension plan declined from 39 percent in 1975 to 21
percent in 1997, while the share participating in a DC plan as their
primary pension plan increased from 6 percent to 25 percent. (See fig. 4.)
The decline in DB pension plan coverage and the increase in DC pension
plan coverage over the past 3 decades means that more of the
responsibility for retirement saving has shifted to individual workers
from employers.

Percentage 0 10

20 30

40 50

60 70

1999 1980 1960

Source: Bureau of the Census.

Page 10 GAO- 03- 429 Retirement Income

Figure 4: Estimated Private Wage and Salary Worker Participation Rates
Under DB and DC Pension Plans

Demographic changes over the last 40 years have also altered the
circumstances of workers as they save for retirement. Educational
attainment, for example, has increased over time. In 1960, only about 8
percent of the population 25 years of age and older had a college degree.
By 1999, 25 percent of the population 25 years or older were college
graduates. (See fig. 5.) The increase in educational attainment over time
could facilitate increased saving among those younger workers who attain

higher education. The composition of households has also changed over this
period with the share of households headed by a married couple decreasing.
In 1960, 74 percent of all households were comprised of married couple
families. By 1999 this had fallen to 53 percent. At the same time, the
percentage of one- person households increased from 13 percent to 26
percent of all households. (See fig. 6.) Median incomes are typically
lower for families headed by a single female or for single person
households. In addition, life expectancy has increased across the

Percentage of workers participating 0 10

20 30

40 50

1997 1995 1993 1991 1989 1987 1985 1983 1981 1979 1977 1975

Source: Department of Labor, Employee Benefits Security Administration
(formerly the Pension and Welfare Benefits Administration). DB

DC- Supplemental DC- Primary

Page 11 GAO- 03- 429 Retirement Income

generations. 9 The greater life expectancy of the younger generations
could mean that the retirement income of the Baby Boom and Generation X
would need to support a larger number of years.

Figure 5: Levels of Education Completed by Individuals Age 25 and Over

9 The life expectancy for a person born in 1940 (Pre- Baby Boom) is 61.4
years for a male and 65.7 years for a female. However, a person born in
1955 (Baby Boom) has a life expectancy of 66.7 years if male and 72. 8
years if female. And someone born in 1970, and therefore a

member of Generation X, has a life expectancy of 67. 2 years if male and
74.9 years if female.

Percentage of population 0 10

20 30

40 50

60 70

Y 1999 1980 1960

Less than H. S. H. S. or some college College degree or more Source:
Bureau of the Census.

Page 12 GAO- 03- 429 Retirement Income

Figure 6: Percentage of Households by Household Composition

The retirement security of today*s workers will also be affected by
changes in the cost and provision of health care. Over the last 40 years,
the provision of health benefits has become more expensive for employers
as generous benefits have combined with higher utilization rates, a
growing elderly population, and a rapidly increasing cost of service. In
response to these increased costs, many employers have begun to limit the
health benefits provided, either by terminating their plans, restricting
benefits, or reducing their share of the premium. As a result, future
retirees are likely to pay more of the costs of their health care.
Consequently, today*s workers might have to work longer, save more, or
both, to ensure sufficient access to health benefits. In addition to
paying more for privately sponsored health benefits, today*s current
workers might also pay more in retirement for Medicare. Medicare costs are
continuing to rise with the result that either benefits will have to be
reduced or monthly premiums will have to be increased.

Given all these demographic changes, as well as regulatory and economic
changes, analysis of retirement income is increasingly dependent on good
estimates, which in turn require adequate data. In a recent report on

Percentage of households 0 10

20 30

40 50

60 70

80 X 1999 1980 1960

Married couple Female householder One- person household Source: Bureau of
the Census.

Page 13 GAO- 03- 429 Retirement Income

needed improvements in retirement income data, we identified data
improvements that experts say are a priority for the study of retirement
income. 10 In particular, experts cited data from employers on employee
benefits, as well as linkages between individual and household surveys and
administrative data, as being helpful for estimating future retirement
income.

Baby Boom and Generation X households headed by individuals aged 25 to 34
have greater accumulated assets, adjusted for inflation, than current
retirees had when they were the same age but they also have more debt. The
large increase in assets between current retirees* the Pre- Baby Boom
generation* and the Baby Boom is due mainly to increases in home equity
and increases in the rate of home ownership. The modest increase in assets
between the Baby Boom and Generation X can be accounted for in large part
by the increase in the ownership and value of DC retirement accounts,
because SCF data do not reflect the value of benefits from DB pension
plans. 11 While the percentage of households with debt has changed very
little across the generations, the real total debt levels have more than
doubled between current retirees and Generation X workers. Yet, for most
young Baby Boom and Generation X households, assets exceed debts and the
net worth of these households with positive net worth is 60 percent
greater than that of current retirees at similar ages. However,
particularly for Generation X, greater life expectancy may require more
assets to cover more years in retirement and greater assets may also be
required to support higher standards of living. Within each generation,
the distribution of net worth across households is affected by economic
and demographic characteristics. Specifically, those who do not own their
own home, are less educated, or are single, have less in net worth.

10 U. S. General Accounting Office, Retirement Income Data: Improvements
Could Better Support Analysis of Future Retirees* Prospects, GAO- 03- 337
(Washington, D. C.: Mar. 21, 2003).

11 Coverage by DB pension plans is greater for current retirees than for
the Baby Boom or Generation X. Therefore, our measure of wealth
underestimates their wealth relative to the wealth of the younger
generations. To the extent that a larger percentage of the Baby Boom than
Generation X is covered by DB plans, our measure of wealth also
underestimates

wealth for the Baby Boom relative to Generation X. Baby Boom and

Generation X Workers Have More Assets and More Debt Than Current Retirees
Had at Similar Ages

Page 14 GAO- 03- 429 Retirement Income

For households headed by a 25- to 34- year old, both the median value of
total assets (in 1998 dollars) and the percentage of households with
assets increased across the generations. 12 (See fig. 7.) The median value
of total assets for the Baby Boom and Generation X is more than 50 percent
greater than that for the Pre- Baby Boom generation. 13 While our analysis
indicates that asset levels increase across the generations, it does not
take into account the expectation of rising standards of living. 14
Generation X,

for example, could have greater assets than those of previous generations
and still feel that these assets are insufficient for the lifestyle they
want or expect.

For households headed by a 25- to 34- year old, the increase in assets
across the generations can be attributed mainly to housing and DC
retirement accounts. (See fig. 7.) As we have noted, our measure of assets
does not include the value of benefits from DB pension plans and, to the
extent that a larger percentage of the Pre- Baby Boom and the Baby Boom
than Generation X is covered by DB plans, will underestimate the true

value of assets for the Pre- Baby Boom and the Baby Boom relative to
Generation X. The large increase in total asset accumulation between the
Pre- Baby Boom and the Baby Boom is largely due to increases in home

equity and increases in the rate of home ownership. The median value of
housing assets increased from $72,890 for the Pre- Baby Boom to $78,583
for the Baby Boom, while the percentage of households owning their own
home increased from 39 to 45 percent. The modest increase in total asset
accumulation between the Baby Boom and Generation X can be accounted for
in large part by the increase in the ownership and value of retirement
accounts. The median value of DC retirement accounts

increased from $2,947 for the Baby Boom to $8,003 for Generation X, while
the percentage of households with retirement accounts increased from

12 We define total assets to include assets that are specifically
dedicated to retirement, such as IRAs, 401( k) s, 403( b) s, and other
thrift- type plans, as well as assets that are not specifically dedicated
to retirement but may ultimately provide retirement income, such as
housing, financial assets (including savings accounts, mutual funds,
stocks, and bonds), and nonfinancial assets (including vehicles, business
interests, and nonresidential real

estate). 13 Median values of assets are calculated only for those
households that have assets.

14 Comparisons across the 3 years selected, 1962, 1983, and 1998, need to
be qualified because these years do not represent similar points in the
business cycle. 1962 and 1998 were at the early and late stages,
respectively, of an economic expansion, while 1983 was at the very end of
a recession. To the extent that the position in the business cycle affects
the real value of assets and debts, the comparison across generations may
be misleading. Increases in Home Equity

and Ownership are Responsible for Most of the Increase in Assets Across
the Generations

Page 15 GAO- 03- 429 Retirement Income

20 percent to 46 percent. The increased percentage of households with
retirement accounts reflects changes in the types of pension plans offered
by employers. Between 1983 and 1997, the percentage of workers covered by
primary DC pension plans, under which the worker has a retirement

account, increased from 11 percent to 25 percent while the percentage of
workers covered by DB pension plans declined from 35 percent to 21
percent.

Figure 7: Median Value of Total Assets, Retirement Accounts, and Housing
Assets, and the Percentage of Households with these Assets for Households
Headed by a 25- to 34- Year- Old

Note: GAO analysis based on data from the Survey of Consumer Finances. The
median for housing assets is larger than the median for total assets
because these medians come from two different distributions. Total assets
include bank accounts and automobiles as well as housing, so the
distribution of the value of total assets ranges from assets with
relatively low values, such as bank accounts and other financial assets,
to assets with relatively high values, such as houses. The distribution
for housing assets includes only those households owning a home, whereas
the distribution for total assets includes all households with any type of
asset, including those who do not own homes.

0 10

20 30

40 50

60 70

80 90

1998 Generation X 1983 Baby Boom 1962 Pre- Baby Boom Median value in 1998
dollars (in thousands)

Total assets Retirement accounts Housing assets Source: Federal Reserve
Board.

Percentage of households 92.3 3.1 39.2 94.5 20.2 45.1 95.1 45.7 45.7

Page 16 GAO- 03- 429 Retirement Income

Financial and nonfinancial assets contribute only modestly to the increase
in total assets across the generations. (See fig. 8.) Financial assets
include savings accounts, mutual funds, and stocks and bonds while
nonfinancial assets include vehicles, business interests, and
nonresidential real estate. The median value of financial assets varies
between less than $2,000 for

the Pre- Baby Boom generation and $4,000 for the Baby Boom. A greater
percentage of households in the younger cohorts have financial assets than
was the case for current retirees. The median value of nonfinancial assets
is greater than that for financial assets in each of the generations

and has increased across the cohorts. While the ownership of nonfinancial
assets increased for the Baby Boom, relative to current retirees, it
decreased for Generation X relative to both the Baby Boom and current
retirees.

Page 17 GAO- 03- 429 Retirement Income

Figure 8: Median Value of Total Assets, Financial Assets, and Nonfinancial
Assets, and the Percentage of Households with These Assets for Households
Headed by a 25- to 34- Year Old

Note: GAO analysis based on data from the Survey of Consumer Finances.

The degree to which the younger cohorts will be able to add to the assets
that we observe when they are ages 25 to 34 will be affected by a number
of demographic and economic factors. Individuals have control over some of
these factors. For example, they can determine how much education they
receive, how long they work, whether both spouses in a couple work,

how much they save while they are working, and whether they stay married
or get divorced. On the other hand, individuals have no direct control
over the rate of growth of real wages, the performance of the overall
economy, the rate of return on financial assets, changes in housing
prices, shifts in pension coverage and generosity of benefits, the state
of the health care system, changes in life expectancy, and the resolution
to the funding shortfall for Social Security and Medicare. One of the
resolutions to the funding shortfall for both Social Security and Medicare
is to increase the payroll tax that employees and employers pay. An

0 10

20 30

40 50

1998 Generation X 1983 Baby Boom 1962 Pre- Baby Boom Median value in 1998
dollars (in thousands)

Total assets Financial assets Nonfinancial assets Source: Federal Reserve
Board.

Percentage of households 92.3 77.5 87.8 94.5 87.8 89.1 95.1 88.2 82.5

Page 18 GAO- 03- 429 Retirement Income

increase in the payroll tax, of course, reduces the amount of an
individual*s disposable income available to both consume and save. On the
other hand, if individuals expected Social Security benefits to be
reduced, they might increase their personal saving in order to offset this
reduction

in benefits. Likewise, increases in life expectancy may also require
increased saving in order to provide for a greater number of years in
retirement or might induce people to work longer.

For households headed by a 25- to 34- year old, overall debt levels
increase across the generations. (See fig. 9.) The median level of debt
for the Baby Boom is 38 percent greater than that for the Pre- Baby Boom
generation while Generation X*s median level of debt is 146 percent
greater than that of the Pre- Baby Boom generation and 78 percent greater
than that of the

Baby Boom. The percentage of households with debt changed very little,
however, remaining at roughly 83- 84 percent across the generations. Thus,
those households that go into debt are going into debt more deeply with
each new generation.

The increase in debt levels between the Baby Boom and Generation X was due
largely to increases in housing debt. 15 The median value of housing debt
increased between the Baby Boom and Generation X by 61 percent. The
percentage of households with housing debt changed very little between
these two generations, however, remaining at roughly 40 percent. 15 Median
values of debt are calculated only for those households that have debt.
The Younger Generations,

Especially Generation X, Have Higher Levels of Debt Than Current Retirees
Did at Similar Ages

Page 19 GAO- 03- 429 Retirement Income

Figure 9: Median Value of Debt and the Percentage of Households with Debt
for Households Headed by a 25- to 34- Year Old (Total Debt, Housing Debt,
Financial Debt, and Other Debt)

Note: GAO analysis based on data from the Survey of Consumer Finances. The
median for housing debt is larger than the median for total debt because
these medians come from two different distributions. Total debt includes
credit card and installment debt as well as housing debt. Because the
distribution of the value of total debt includes relatively low levels of
nonhousing debt as well as the higher levels of housing debt, the median
will be lower than the median for housing debt. Nonhousing debt includes
debt for other residential property, such as vacation homes, debt for
nonresidential real estate, business debt, credit card debt, and
installment loans. Other debt includes loans against pensions, loans
against life insurance, and margin loans.

The amount of debt carried by a household will affect the value of its net
worth. For households headed by a 25- to 34- year old, the percentage of
households with positive net worth and the median value of positive net
worth increased between the Pre- Baby Boom and Generation X; however, the
median value of negative net worth is also much higher for Generation X.
(See fig. 10.) The median value of net worth for households with positive
net worth increased by 60 percent between the Pre- Baby Boom

0 10

20 30

40 50

60 70

80 1998 Generation X 1983 Baby Boom 1962 Pre- Baby Boom Median value in
1998 dollars (in thousands)

Total debt Housing debt Other debt Nonhousing debt Source: Federal Reserve
Board.

Percentage of households 84.5 36.9 3.2 80.8 82.5 40.5 14.8 72.3 83.6 39.5
10.7 76.9

Page 20 GAO- 03- 429 Retirement Income

and the two younger generations. The percentage of households with
negative net worth is smaller for the two younger generations than for
current retirees when they were young. However, the median value of net
worth for households with negative net worth is about four times larger

for Generation X than for the Baby Boom or the Pre- Baby Boom.

Figure 10: Median Value of Positive and Negative Net Worth and the
Percentage of Households with Net Worth for Households Headed by a 25- to
34- Year Old

Note: GAO analysis based on data from the Survey of Consumer Finances. Net
worth is defined as assets minus debt. If assets are greater than debt,
the household has positive net worth. If debt is greater than assets, the
household has negative net worth. Therefore, the positive and negative net
worth columns will not sum to total net worth since they are based on
different distributions.

-10 -5

0 5

10 15

20 25

30 X 1998 Generation X 1983 Baby Boom 1962 Pre- Baby Boom Median value in
1998 dollars (in thousands)

Positive Negative Source: Federal Reserve Board.

Percentage of households 72.9 26.6 87.8 12.2 78.2 21.7

Page 21 GAO- 03- 429 Retirement Income

The younger generations in general have experienced an increase in net
worth relative to current retirees at the same age, with the Baby Boom
having a median net worth three times that of the older generation and
Generation X having a median net worth two and a half times that of
current retirees. However, there are some groups within these cohorts that
have not benefited as much as others. (See table 1.) For example, the
median net worth for Baby Boom and Generation X homeowners is between $17,
000 and $35, 000 greater than that for Pre- Baby Boom homeowners; for
nonhomeowners, net worth between the older and

younger cohorts differs by only $2,300 to $3,700. Median net worth has
increased across the cohorts for all education levels, but much less so
for those without a high school degree. Both single headed households and
households headed by a married couple have seen increases in net worth;
however, the increases have been much smaller for single headed
households. These trends have increased the disparity in net worth within
the younger generations compared to the Pre- Baby Boom.

Table 1: The Median Value of Net Worth for Households Headed by a 25- to
34- Year Old* Differences by Homeownership, Marital Status, and Education
In 1998 dollars Median Pre- Baby Boom (1962) Baby Boom

(1983) Generation X (1998)

Homeowners $25,594 $60,521 $43,100 Nonhomeowners 982 4,699 3,300 Less than
high school 815 4,658 2,500 High school graduate 10,044 17,195 17,920
College graduate 23,953 36,569 30,020 Married 9,165 31,677 34,501 Not
married 0 7, 160 5,750

All households $6,072 $19,504 $15,500

Source: GAO analysis based on data from the Survey of Consumer Finances.

Another measure of the well- being of different generations is the ratio
of net worth, or wealth, to income. Median ratios of wealth to income for
households headed by a 25- to 34- year old are presented in table 2. The
Baby Boom and Generation X have higher wealth- to- income ratios than
current retirees had at similar ages. This suggests that households in the
younger generations have been able to accumulate more wealth than was the
case for current retirees. The ratios also reflect the differences across
demographic groups within generations. Within each generation, ratios of
Within Each Generation,

the Value of Net Worth Is Lower for Those Who Do Not Own Their Own Home,
Are Less Educated, or Are Single

Page 22 GAO- 03- 429 Retirement Income

wealth to income are higher for the well- educated, the married, and
homeowners.

Table 2: Median Value of Wealth- to- Income Ratios for Households Headed
by a 25- to 34- Year Old* Differences by Homeownership, Marital Status,
and Education Median

Pre- Baby Boom (1962) Baby Boom (1983) Generation X

(1998)

Homeowner 0.641 1.343 1.044 Nonhomeowners 0.052 0.167 0.151 Less than high
school 0.029 0.216 0.159 High school graduate 0.278 0.525 0.586 College
graduate 0.510 0.799 0.743 Married 0.261 0.755 0.742 Not married 0.000
0.299 0.268 All households 0.214 0.562 0.523 Source: Federal Reserve
Board. Note: GAO analysis based on data from the Survey of Consumer
Finances.

In our simulations, Generation X and the Baby Boom 16 have similar levels
of retirement income in real terms (adjusted for inflation). Social
Security benefit levels for Generation X and the Baby Boom will depend on
how the Social Security funding shortfall is resolved. The shift to
greater DC pension coverage does not have much effect on the pension
income of Generation X relative to the Baby Boom. However, replacement
rates for Generation X are estimated to be lower than for the Baby Boom
under each scenario we considered, suggesting retirement income for
Generation X may not keep up with the rising standard of living, absent
increases in other sources of retirement income, or increases in rates of
return.

16 For our analyses, we considered two illustrative birth cohorts* Baby
Boomers born in 1955 and Generation Xers born in 1970. Generation X and
the

Baby Boom Are Estimated to Have Similar Levels of Real Retirement Income,
but Generation X Could Have Lower Replacement Rates

Page 23 GAO- 03- 429 Retirement Income

Our simulations suggest that Generation X will have real retirement income
17 that is similar or somewhat higher than the Baby Boom, depending on how
the Social Security funding shortfall is resolved. 18 If the shortfall is
resolved by increasing the program*s revenues 19 to maintain scheduled
benefits, then Generation X is estimated to have somewhat higher real
retirement income at age 62 than the Baby Boom generation. (See table 3.)
Because our simulations assume that real earnings increase

over time, 20 Generation X would have higher Social Security benefits than
the Baby Boom. However, if the shortfall is resolved through gradual
benefit reductions over time, 21 then Generation X is estimated to have
real retirement income levels at age 62 that are more similar to those of
the Baby Boom. (See table 4.) Because the benefit reductions increase over
time, they would have more impact on Generation X than on the Baby Boom,
leading to slightly lower Social Security benefits for Generation X
relative to the Baby Boom.

17 Due to the current state of the simulation models used, the measure of
retirement income used here includes Social Security benefits, private
pension income, and spouse*s earnings. Private pensions include both DB
and DC plans. See appendix I for a description of the DB and DC plans
modeled. 18 While there are many ways of achieving the same result, we
chose to focus on the polar cases or bounds for change within the current
system. For additional information on the benchmarks, see U. S. General
Accounting Office, Social Security: Program*s Role in Helping Ensure
Income Adequacy, GAO- 02- 62 (Washington, D. C.: Nov. 30, 2001) and
appendix I. 19 There would be no change in benefits, but additional
revenue would enter the system

through increased taxes, general revenue transfers, or some similar means.
20 Our simulations are based on the intermediate assumptions in the 2001
Social Security Trustees Report. 21 There would be no change in the amount
of revenue entering the system, instead, initial Social Security benefits
would be reduced each year in order to make the system solvent over the
75- year projection period. Cross- generational

Comparisons of Retirement Income Levels Will Be Affected by the Resolution
to the Social Security Funding Shortfall

Page 24 GAO- 03- 429 Retirement Income

Table 3: Median Monthly Household Retirement Income and Its Major
Components, at Age 62, if Social Security Shortfall Addressed by
Increasing Revenues

Baby Boom Generation X

Retirement income $3,147 $3,365 Pension income (DB and DC) $962 $942
Social Security benefits $1,366 $1,549 Source: GEMINI/ PENSIM. Note:
Median values at age 62 discounted to 2001 dollars and DC account balances
annuitized at

retirement. Not all components of retirement income are shown. Pension
income is measured across all individuals in the cohort. Median pension
income for those covered by a pension is $1,495 for the Baby Boom and
$1,440 for Generation X. In our simulations, the rates of return for DC
pension

contributions vary over time and by individual. Median spousal earnings
for those spouses working are $3,295 for the Baby Boom and $3,375 for
Generation X.

Changes to the Social Security system could also affect other forms of
retirement income, especially those not considered here. If program
revenues were increased by raising Social Security payroll taxes, then
individuals would have less disposable income to save for retirement. This
could take the form of decreases in personal saving or lower contributions
to DC pension plans. Instead, if general revenues were used, the funding
of other programs could be affected, which could lower some individuals*

income from other income support programs, such as Supplemental Security
Income (SSI). The timing and implementation of the changes to the Social
Security system are also relevant since action taken later rather than
sooner would necessitate larger tax increases or benefit reductions and
the impact on Generation X could be even greater.

Table 4: Median Monthly Household Retirement Income and Its Major
Components, at Age 62, if Social Security Shortfall Addressed by Reducing
Benefits Baby Boom Generation X

Retirement income $3,011 $2,991 Pension income (DB and DC) $962 $942
Social Security benefits $1,234 $1,199 Source: GEMINI/ PENSIM. Note:
Median values at age 62 discounted to 2001 dollars and DC account balances
annuitized at

retirement. Not all components of retirement income are shown. Pension
income is measured across all individuals in the cohort. Median pension
income for those covered by a pension is $1,495 for the Baby Boom and
$1,440 for Generation X. In our simulations, the rates of return for DC
pension

contributions vary over time and by individual. Median spousal earnings
for those spouses working are $3,295 for the Baby Boom and $3,375 for
Generation X.

Page 25 GAO- 03- 429 Retirement Income

Generation X and the Baby Boom are estimated to have similar levels of
pension income when our simulations assume that the rate of DB and DC
pension coverage is constant over time. 22 (See table 4.) DC account
balances are annuitized at retirement to facilitate comparisons. While
Generation X*s simulated higher earnings might have suggested higher
pension income as well, they may have been too young to completely benefit
from the strong stock market of the 1990s. The assumption that the rate of
pension coverage is constant over time has not been the experience of
private pensions in the United States over the last 25 years. DB coverage
has declined, and DC coverage has increased.

Generation X and the Baby Boom are estimated to have similar levels of
pension income even when our simulations assume Generation X only has
access to DC pension plans. 23 (See table 5.) While assuming that all
pension coverage will shift to DC plans represents the extreme case, it
does provide a bound to our estimates. These simulations provide some

insight into the impact that the continuing shift from DB to DC pension
coverage might have on retirement income for Generation X, since the final
outcome of this shift is uncertain.

22 The Economic Growth and Tax Relief Reconciliation Act of 2001 increased
the limits on contributions to DC pension plans and the maximum DB
pension. The act also contained a sunset provision, which will return
these limits to their pre- act levels in 2010. Legislation has been
proposed that would eliminate the sunset provision in the act. Since no
action has been taken on this legislation, we present our findings under
the sunset scenario. Our simulations of a no- sunset scenario appear in
appendix II.

23 This result may depend on the rates of return. In our analyses, the
mean nominal rates of return, which all returns varied around, were 6.3
percent for Treasuries, 6. 8 percent for corporate bonds, and 10 percent
for equities. See the limitations of analysis in appendix I. Generation X
and the Baby

Boom May Have Similar Levels of Pension Income Even When Pension Coverage
Shifts from DB to DC Plans

Page 26 GAO- 03- 429 Retirement Income

Table 5: Median Monthly Household Retirement Income and Its Major
Components, at Age 62, if Social Security Shortfall Addressed by Reducing
Benefits and Generation X Having Only DC Pension Plans

Baby Boom Generation X

Retirement income $3,011 $3,096 Pension income (DB and DC) $962 $984
Social Security benefits $1,234 $1,199 Source: GEMINI/ PENSIM. Note:
Median values at age 62 discounted to 2001 dollars and DC account balances
annuitized at

retirement. Not all components of retirement income are shown. Pension
income is measured across all individuals in the cohort. Median pension
income for those covered by a pension is $1,495 for the Baby Boom and
$1,700 for Generation X. In our simulations, the rates of return for DC
pension

contributions vary over time and by individual. Median spousal earnings
for those spouses working are $3,295 for the Baby Boom and $3,375 for
Generation X.

In our simulations, Generation X has a lower earnings replacement rate 24
than the Baby Boom (see table 6) even though the Baby Boom and Generation
X are estimated to have similar levels of retirement income. Our
assumption of increasing earnings over time leads to Generation X having a
lower replacement rate. The largest difference between the cohorts, in
terms of replacement rates, occurs under the Social Security benefit
reduction scenario since benefit levels are falling more for Generation X
while earnings are unchanged. While the shift in pension coverage raises
the level of retirement income for Generation X, it does not change the
replacement rate. 25 The earnings replacement rate is an indicator of how
well individuals are

doing at maintaining their pre- retirement standard of living. While our
estimated replacement rates do not cover all individuals in each
generation or include all forms of retirement income, they still might
indicate a decline in the standard of living during retirement for
Generation X. However, this does not take into account that retirement
income may increase because of behavioral changes or other external

24 Our earnings replacement rate is calculated as retirement income at age
62 divided by earnings at age 61. Given the complexity of trying to
calculate replacement rates at the household level when spouses are not
the same age and beneficiaries become entitled at different ages, we
calculated replacement rates at age 62 only for retired workers who had
worked at age 61 and whose spouses, if married, were the same age.

25 Our shift to all DC coverage assumed that some individuals who were
previously covered by a DB plan would choose not to contribute to a DC
plan. This decrease in pension coverage may offset the increase in pension
income, leaving the median replacement rate unchanged. Replacement Rates
Lower

for Generation X Relative to the Baby Boom

Page 27 GAO- 03- 429 Retirement Income

factors. Since Generation X is still relatively young, it is possible that
some members of this cohort may change their behavior and save more or
work longer. 26 Also, variations in rates of return could be greater than
expected, causing some individuals in our simulations to experience higher
asset returns. Any of these factors could raise retirement income and,
possibly, Generation X*s replacement rate. If this were to occur, the
difference in replacement rates between the Baby Boom and Generation X
could be smaller than we estimate.

Table 6: Median Household Replacement Rates for Baby Boom and Generation X
Baby Boom Generation X

Social Security Tax Increase Scenario, Constant DB/ DC 74.6% 68.1% Social
Security Benefit Reduction Scenario, Constant DB/ DC 70.7% 60.4% Social
Security Benefit Reduction Scenario, Generation X only has DC 70.7% 60.2%
Source: GEMINI/ PENSIM. Note: The replacement rate is calculated as
retirement income at age 62 divided by earnings at age

61 for retired workers who worked at age 61 and whose spouses, if married,
were the same age. Some but not all of the difference in replacement rates
between generations may be explained by the difference in the normal
retirement age.

Our simulations suggest that retirement income will vary significantly
within both Generation X and the Baby Boom. Retirement income will also
vary by demographic group, with income being lower for the less educated
and single women.

26 In order to facilitate comparison, we examined retirement income at age
62. However, differences in life expectancy and health status,
particularly for Generation X, may lead to more years in retirement and a
need for more assets. If people work longer because they are healthier and
anticipate living longer, examining retirement income at 62 may not
capture these behavioral changes. The Distribution of

Retirement Income Will Vary within Generations, and Certain Groups Will Be
More Likely to Have Lower Retirement Incomes

Page 28 GAO- 03- 429 Retirement Income

Simulated retirement income will vary widely across households within both
Generation X and the Baby Boom. 27 For example, if married households in
Generation X were arranged from lowest to highest in terms of their
retirement incomes at age 62, the top 20 percent would receive over 40
percent of all retirement income while the bottom 20 percent

would receive less than 7 percent. (See fig. 11.) 28 The disparity between
the top 20 percent and bottom 20 percent is even larger for single
persons. Because retirement income is closely linked to earnings, which
are known to vary significantly, 29 this degree of variation in estimated
retirement income is not surprising.

27 Because projected distributions for the two generations are very
similar we only present figures and tables for Generation X in this
section and present the same information for the Baby Boomers in appendix
II. The projections discussed here assume funded Social Security benefits,
no extension of raised pension contribution limits, and the coverage rates
for DB and DC pensions remain constant over time. The distributions under
alternative scenarios, including employers only offering DC plans to
Generation X, are also very similar (see app. II).

28 Simulated retirement income is pre- tax and excludes important
components of retirement income both of which affect the degree of
variation. Examining after tax income would most likely reduce variation
because of the progressive nature of the income tax. Simulated income
exlcudes personal savings and SSI and other forms of public assistance.
Including personal savings would most likely increase variation as there
is great variation in the

distribution of wealth. Including SSI would raise the bottom of the
distribution (see Arthur B. Kennickell, An Examination of Changes in the
Distribution of Wealth from 1989 to 1998: Evidence from the Survey of
Consumer Finances, Federal Reserve Board (June 2000)). 29 See U. S. Census
Bureau, Current Population Reports: P60- 204, The Changing Shape of the
Nation*s Income Distribution 1947- 1998, (Washington, D. C.: 2000). The
Distribution of

Retirement Income Will Vary within Both Generation X and the Baby Boom

Page 29 GAO- 03- 429 Retirement Income

Figure 11: Proportion of Household Retirement Income for Each Quintile of
the Retirement Income Distribution at Age 62 for Generation X

Note: Retirement income includes Social Security benefits, pension
benefits, and earnings of younger spouses. Single individuals include
those divorced, widowed, or never married at age 62. Simulations assume
all workers retire completely at age 62, Social Security benefits are
reduced to funded levels, no extension of raised pension contribution
limits, and constant rates of coverage over time for DB and DC pensions.

When examining the sources of retirement income, simulated pension
benefits are less evenly distributed than simulated Social Security
benefits. Married couples in the top 20 percent in terms of pension
benefits receive over 58 percent of all pension benefits while those in
the bottom 20 percent receive no benefits at all, as shown for Generation
X in figure 12. In comparison, married couples in the top 20 percent in
terms of Social Security benefits receive about 31 percent of all Social
Security benefits, while those in the bottom 20 percent receive about 10
percent.

0 10

20 30

40 50

60 70

Top 20% Fourth quintile Third quintile Second quintile Bottom 20%
Percentage of income

Married at age 62 Single at age 62 Source: GEMINI/ PENSIM.

Retirement income quintiles

Page 30 GAO- 03- 429 Retirement Income

Figure 12: Proportion of Household Pension Benefits and Household Social
Security Benefits for Each Quintile of the Pension Benefit and Social
Security Benefit Distributions at Age 62 for Generation X

Note: Retirement income includes Social Security benefits, pension
benefits, and earnings of younger spouses. Single individuals include
those divorced, widowed, or never married at age 62. Simulations assume
all workers retire completely at age 62, Social Security benefits are
reduced to funded levels, no extension of raised pension contribution
limits, and constant rates of coverage over time for DB and DC pensions.

Pension benefits are less evenly distributed for at least two reasons.
First, by design, the Social Security benefit formula is more generous
toward low- income and disabled workers, in contrast to pensions, which
tend to play a larger role in the retirement income of higher earning
workers. 30 Second, some workers have no pension coverage while nearly all
workers

are covered by Social Security. In our simulations, 20 percent of married
households and 33 percent of single individuals in Generation X receive no
pension benefits. The median retirement income for married households
where at least one member has a pension is almost twice as large as the 30
U. S. General Accounting Office, Private Pension: Issues of Coverage and
Increasing

Contribution Limits for Defined Contribution Plans, GAO- 01- 846
(Washington, D. C.: Sept. 2001).

Percentage of benefits

Source: GEMINI/ PENSIM.

Pension benefit quintiles 0

10 20

30 40

50 60

70 Top 20% Fourth quintile Third quintile Second quintile Bottom 20%

Percentage of benefits

Married at age 62 Single at age 62

Social Security benefit quintiles 0

10 20

30 40

50 60

70 Top 20% Fourth quintile Third quintile Second quintile Bottom 20%

Page 31 GAO- 03- 429 Retirement Income

median for married households where neither member has a pension. (See
fig. 13.) The percentage difference between those with pensions and
without pensions is even larger for single persons.

Figure 13: Median Monthly Household Retirement Income at Age 62 for
Generation X by Pension Status

Note: Retirement income includes Social Security and pension benefits and
earnings of younger spouses. Single individuals include those divorced,
widowed, or never married at age 62. Simulations assume all workers retire
completely at age 62, Social Security benefits are reduced to funded
levels, no extension of raised pension contribution limits, and constant
rates of coverage over time for DB and DC pensions.

Simulated retirement income varies by educational attainment, marital
status, and gender. Simulated retirement income is lower for those with
less education, as shown for Generation X in figure 14. The median
retirement income for married high school dropouts is about 43 percent
less than the median for married college graduates. The percentage
difference between single high school dropouts and single college

graduates is even larger. The less educated have lower Social Security and
pension benefits due to lower lifetime earnings and lower rates of pension
coverage. In our simulations for Generation X, 66 percent of married
Retirement Income Varies

by Demographic Group

0 1,000

2,000 3,000

4,000 5,000

Z Y X Single at age 62 Married at age 62 Median value in 2001 dollars

Household receives no pension benefits Household receives pension benefits
Source: GEMINI/ PENSIM.

Page 32 GAO- 03- 429 Retirement Income

couples without high school degrees receive pension benefits as opposed to
87 percent of married college graduates.

Page 33 GAO- 03- 429 Retirement Income

Figure 14: Median Monthly Household Retirement Income at Age 62 by
Educational Attainment for Generation X

Note: Retirement income includes Social Security benefits, pension
benefits, and earnings of younger spouses. Single individuals include
those divorced, widowed, or never married at age 62. Simulations assume
all workers retire completely at age 62, Social Security benefits are
reduced to funded levels, no extension of raised pension contribution
limits, and constant rates of coverage over time for DB and DC pensions.
Educational attainment for married couples is defined as the attainment of
the Generation X birth cohort member* the spouse may have attained a
different level of education.

Simulated retirement income also varies by marital status with divorced
and never married individuals having lower retirement incomes than widows
and married couples. (See table 7.) Median retirement incomes for never
married persons and divorced persons are about 23 percent less and 32
percent less, respectively, compared to that of widows. Median household
retirement incomes for never married persons and divorced persons are
about 58 percent less and 63 percent less, respectively, compared to that
of married couples. Retirement incomes are less for

Median value in 2001 dollars

Married at age 62 Single at age 62 Source: GEMINI/ PENSIM.

0 1,000

2,000 3,000

4,000 5,000

Graduate degree College graduate Some college

High School graduate High School dropout

0 1000

2000 3000

4000 5000

Graduate degree College graduate Some college

High School graduate High School dropout

Page 34 GAO- 03- 429 Retirement Income

never married persons and divorced persons, even if one compares
retirement income per household member. 31 Table 7: Median Monthly
Household Retirement Income at Age 62 by Marital Status

for Generation X, in 2001 Dollars Household

income Income per household member

Never married $1,572 $1,572 Married $3,757 $1,878 Widowed $2,047 $2,047
Divorced $1,389 $1,389 Source: GEMINI/ PENSIM. Note: Retirement income
includes Social Security benefits, pension benefits, and earnings of
younger

spouses. Simulations assume all workers retire completely at age 62,
Social Security benefits are reduced to funded levels, no extension of
raised pension contribution limits, and constant rates of coverage over
time for DB and DC pensions.

How widows and married couples compare in terms of retirement income
depends on the measure of income used. Widows have lower median retirement
income than married couples using household income as the measure, but
greater median retirement income using income per household member as the
measure. (See table 7.) Whether or not married couples have a higher
standard of living than widows depends on how much they save by sharing
their expenses.

Simulated retirement income is lower for single women than for single men,
as shown for Generation X in figure 15. The median retirement income for
single women is about 31 percent less than the median for single men.
Again this is due to lower lifetime earnings and a lower rate of pension
coverage. Sixty- three percent of single women in Generation X receive
pension benefits as opposed to 74 percent of single men.

31 Comparing the retirement incomes of single individuals to married
couples is complicated by the difference in household size. Comparing
household income without adjusting for household size makes married
couples appear better off than they may actually be because their incomes
must support two people instead of one. Comparing income per household
member makes married couples look worse than they may actually be because
it assumes there are no savings associated with cohabitation. In this
case, regardless of the measure

chosen, divorced and never married persons have lower median retirement
incomes.

Page 35 GAO- 03- 429 Retirement Income

Figure 15: Median Monthly Retirement Income at Age 62 by Gender for Single
Person Households for Generation X

Note: Retirement income includes Social Security and pension benefits.
Single individuals include those divorced, widowed, or never married at
age 62. Simulations assume all workers retire completely at age 62, Social
Security benefits are reduced to funded levels, no extension of raised
pension contribution limits, and constant rates of coverage over time for
DB and DC pensions.

Variation in simulated retirement income suggests some members of both
generations may be at greater risk of retiring with insufficient
resources. Assessing the sufficiency of simulated retirement income is
difficult because we do not simulate assets, earnings in retirement, and
SSI and other public assistance programs. However, retirees who earned low
earnings over their working years may not have substantial assets or
earnings in retirement, and SSI provides only a very modest level of
support and is restricted to the poorest of retirees.

Our analysis of wealth at ages 25 to 34 and our simulations of Social
Security and pension benefits at age 62 suggest that both the Baby Boom
and Generation X are likely to have similar levels of retirement income in

real terms, but that level may not support Generation X*s future living
standards. Our analysis also indicates that across the generations,
similar subgroups of the population are most vulnerable in retirement.
Concluding

Observations

Median value in 2001 dollars

Source: GEMINI/ PENSIM.

0 500

1,000 1,500

2,000 2,500

Z Y X W V Single female Single male

Page 36 GAO- 03- 429 Retirement Income

The levels of retirement income that Baby Boom and Generation X workers
will actually receive depend in part upon their own behavior, such as how
long they work or how much they save, and in part upon factors they cannot
control, such as the performance of the overall economy, the rate of
return on financial investments, and changes in Social Security and health
care financing. Individuals* behavior, and future economic events, may
vary significantly from the assumptions underlying our models, especially
for those workers who still have many years to work before retirement. In
addition, estimates of future retirement income depend on adequate data on
individuals* earnings, wealth, and pensions, not all of which are easily
captured in existing data sets. Further, rising expectations about
consumption, leisure and health care in retirement (and the costs of
meeting these expectations) could require higher replacement rates for
Generation X than for the Baby Boom in order to maintain the standards of
living they achieved while working.

Government policy can potentially have an important effect on individuals*
retirement income. Policies that encourage individuals to acquire more
education and training, to work longer and to save more can help ensure
higher retirement incomes in the future. Also, any reform that
policymakers undertake with regard to the Social Security program or
health care financing will have repercussions for the retirement income of
Generation X and the younger half of the Baby Boom. Our work suggests

the importance of all these policy actions reflecting a coordinated
approach to future retirement income, and that they be made soon enough so
the affected individuals will have adequate time to adjust their work and
saving behavior accordingly. Finally, the continued vulnerability of
certain segments of the population to inadequate resources at retirement
suggests that successful retirement income policies would take potential
impacts on these groups into consideration.

We provided a draft of this report to SSA, Labor, and Treasury. All three
provided technical comments, which we have incorporated as appropriate.

We are sending copies of this report to the Social Security
Administration, the Department of Labor, and the Department of the
Treasury. We will also make copies available to others on request. In
addition, the report will be

available at no charge on GAO*s Web site at http:// www. gao. gov. Agency
Comments

Page 37 GAO- 03- 429 Retirement Income

If you have any questions concerning this report, please contact Barbara
Bovbjerg at (202) 512- 7215. See appendix III for other contacts and staff
acknowledgments.

Sincerely yours, Barbara D. Bovbjerg Director, Education, Workforce

and Income Security Issues.

Appendix I: Scope and Methodology Page 38 GAO- 03- 429 Retirement Income

To gain an understanding of what today*s workers might expect to receive
in terms of retirement income, we compared the wealth of current workers
with that of current retirees, at similar points in their lives, and
estimated the pension and Social Security benefits that the Baby Boom

and Generation X might receive. To analyze personal wealth we used the
Survey of Consumer Finances, a survey of U. S. households sponsored by the
Board of Governors of the Federal Reserve System. To analyze how workers
from the Baby Boom and Generation X compare in terms of the retirement
income they can expect to receive and the likely distribution across
workers within the Baby Boom and Generation X, we simulated expected
retirement income at age 62.

To analyze personal wealth, we used the Survey of Consumer Finances (SCF),
a triennial survey of U. S. households sponsored by the Board of Governors
of the Federal Reserve System with the cooperation of the U. S. Department
of the Treasury. The SCF provides detailed information on U. S.
households* balance sheets and their use of financial services, as well as
on their pensions, labor force participation, and demographic

characteristics as of the time of the interview. The SCF also collects
information on households* total cash income, before taxes, for the
calendar year preceding the survey. Because the survey is expected to
provide reliable information both on assets that are fairly common* such
as houses* as well as on assets that are owned by relatively few* such as
closely held businesses* the SCF uses a sample design that includes a
standard, geographically based random sample and a special over sample of
relatively wealthy families. Weights are used to combine information from
the two samples to make estimates for the full population. The 1962 SCF
was conducted by the Census Bureau and surveyed 3,551 households. The 1983
SCF was conducted by the Survey Research Center of the University of
Michigan and surveyed 3,824 households. The 1998 SCF was conducted by the
National Opinion Research Center at the University of Chicago and surveyed
4,309 households.

Using the SCF, we analyzed how marital status, education, and
homeownership are related to the wealth of households headed by a 25- to
34- year old. Using the 1962, 1983, and 1998 SCFs, we examined the
ownership and level of household savings for current retirees (born
between 1925 and 1945), the Baby Boom (born between 1946 and 1964), and
Generation X (born between 1965 and 1976) when each generation Appendix I:
Scope and Methodology

Analysis of Personal Wealth

Appendix I: Scope and Methodology Page 39 GAO- 03- 429 Retirement Income

was 25 to 34 years old. 1 We selected this age group because this is the
only age group for which we have data on personal wealth in each of the
three generations. Our measure of personal wealth includes tax favored
retirement saving, such as individual retirement accounts (IRA) and 401(
k) s and other thrift

type plans, as well as savings that are not specifically dedicated to
retirement but may enhance retirement income, such as liquid financial
assets (checking accounts, savings accounts, money market deposit

accounts, and money market mutual funds), other financial assets
(certificates of deposit, mutual funds, stocks, and bonds), housing
assets, and nonhousing assets (nonresidential real estate, business
interests, and vehicles). 2 We also looked at housing liabilities and
nonhousing liabilities (credit cards, installment loans, and other debts).
For each component of personal wealth, we calculated the percentage of
households owning that type of wealth as well as the median value. We
looked separately at assets and debt and then combined them to calculate
individual net worth.

For studies in which the focus is on saving or net worth, the SCF is
preferable to other household income surveys, such as the Panel Study of
Income Dynamics (PSID) or the Survey of Income and Program Participation
(SIPP). The SCF has more detailed information about wealth holding, better
distributional characteristics, less item nonresponse, and

fewer imputed variables than the PSID or the SIPP. 3 However, the SCF,
like all surveys, is subject to sampling errors, reporting errors, and
nonresponse errors. Sampling errors result from the fact that survey
estimates are based on a sample of the population rather than on a
complete census of the population. Reporting errors arise because
respondents may not understand what is wanted, may not know the
information requested, or may be reluctant to reveal their actual income
or wealth. Nonresponse errors arise when the family selected for

1 Our analysis does not include every year of each generation. We selected
household heads age 25- 34 in the SCFs corresponding to those born between
1928 and 1937; 1949 and 1958; and 1964 and 1973.

2 For individuals covered by pension plans, the SCF includes amounts
accumulated under defined contribution plans but does not capture the
expected value of future benefits under defined benefit plans. 3 Karen M.
Pence, 401( k) and Household Saving: New Evidence from the Survey of
Consumer Finances (Federal Reserve Board of Governors Working Paper, Dec.
2001), 4.

Appendix I: Scope and Methodology Page 40 GAO- 03- 429 Retirement Income

participation is not available to be interviewed, either because they
refuse to participate or cannot be contacted. Further, the sample sizes
for the SCF are relatively small compared with surveys such as the Current
Population Survey. For our analysis, we are concerned with the fact that
small samples are vulnerable to bias from observations not representative
of the population as a whole. For all of

these reasons, our numbers should be interpreted with some caution. To
analyze how workers from the Baby Boom and Generation X compare in terms
of the retirement income they can expect to receive and the likely
distribution across workers within the Baby Boom and Generation X, we
simulated expected retirement income at age 62. Our measure of retirement
income consists of pension income, Social Security benefits, and spouse*s
earnings. It does not include personal savings, earnings in retirement,
health benefits, or income from other income support programs (e. g.,
Supplemental Security Income). For our simulations, we used the Social
Security and Accounts Simulator (SSASIM), Genuine Microsimulation of
Social Security and Accounts (GEMINI), and Pension Simulator (PENSIM)
simulation models. GEMINI estimated Social Security benefits and PENSIM
estimated pension income from defined benefit and defined contribution
plans for the 1955 birth cohort (Baby Boom) and the

1970 birth cohort (Generation X) and their spouses. Retirement income and
its components were discounted to 2001 dollars, allowing us to make
comparisons across cohorts in terms of the level of retirement income.
However, these comparisons do not give an indication of standards of
living in retirement. To make this comparison, we looked at the earnings
replacement rate, calculated as retirement income at age 62 divided by
earnings at age 61 for retired workers who worked at age 61 and whose

spouse, if married, was the same age. To examine the distribution of
retirement income within both generations, we calculated the degree of
variation by arranging households by retirement income and finding the
proportion of that income received by each quintile. 4 To compare groups
by demographics, we calculated median retirement income by educational
attainment, gender, and marital status. Due to the difference in household
size, we performed most of the above

4 These calculations were repeated for pension income and Social Security
benefits separately. Analysis of Simulated Retirement Income

Appendix I: Scope and Methodology Page 41 GAO- 03- 429 Retirement Income

calculations separately for married couples and singles* those widowed,
divorced, or never married* at age 62. When examining retirement income by
marital status we calculated both household income and income per

household member. 5 SSASIM 6 is a Social Security policy simulation model
developed by the Policy Simulation Group (PSG). The initial version of the
model was developed under a series of contracts from the Social Security
Administration as part of the 1994- 96 Advisory Council on Social
Security.

SSASIM consists of two models, a macro model of aggregate program
finances, and an embedded micro model of selected cohort individuals. In
addition to current law policy, the model can simulate a variety of policy
reforms, from incremental changes to broader structural reforms that would
introduce individual accounts into the broader Social Security system.

GEMINI 7 is a policy microsimulation model also developed by the PSG.
GEMINI is useful for analyzing the lifetime implications of Social
Security policies for a large sample of people born in the same year and
can

simulate different reform features for their effects on the level and
distribution of benefits. GEMINI uses as input birth cohort samples
generated by PENSIM so as to represent the demographic and economic
characteristics of historical birth cohorts. Also, GEMINI incorporates the

same kind of Old Age, Survivor and Disability Insurance (OASDI) program
logic as used in the micro model of SSASIM, with almost all assumption and
policy parameters read from a SSASIM input database. GEMINI produces
output files that contain detailed information about the life

5 Comparing the retirement incomes of single individuals to married
couples is complicated by the difference in household size. Rather than
arbitrarily choosing an equivalence scale, we bounded the problem by
comparing household income and income per household member. Comparing
household income without adjusting for household size provides an upper
bound for the income of married couples relative to the income of singles
because it

assumes that total household living expenses for two people are the same
as for one. Comparing income per household member provides a lower bound
for the income of married couples relative to the income of singles
because it assumes there are no savings associated with cohabitation. 6
For more information on SSASIM go to http:// www. polsim. com/ SSASIM.
html. 7 For more information on GEMINI go to http:// www. polsim. com/
GEMINI. html. SSASIM GEMINI

Appendix I: Scope and Methodology Page 42 GAO- 03- 429 Retirement Income

events and annual OASDI program experience of each individual in the
cohort sample.

For our report, the PSG produced the GEMINI output files using the same
1955 and 1970 birth cohorts used in PENSIM for both a scheduled and funded
Social Security scenario (see following paragraphs for more details.) The
PENSIM and GEMINI output files were then merged, yielding an output file
containing yearly Social Security benefits, pension income, and spouse*s
earnings from age 62 until death for each member of the cohort.

PENSIM 8 is a pension policy simulation model that is being developed by
the PSG to analyze lifetime coverage and adequacy issues related to
employer- sponsored pension plans. The development of PENSIM has been
funded since 1997 by the Office of Policy and Research at the Employee
Benefits Security Administration of the U. S. Department of Labor. PENSIM
produces a random sample of simulated life histories for 100,000 people in
a birth cohort and for their spouses who may have been born in a different

year. The members of the birth cohort experience demographic and economic
events, the incidence and timing of which vary by age, gender, education,
disability, and employment status. The types of life events that are
modeled in PENSIM include:

 demographic events (birth, death);  schooling events (leaving school at
a certain age, receiving a certain

educational credential);  family events (marriage, divorce, childbirth);
 disability events;  initial job placement;  job mobility events
(earnings increases while on a job, duration of a job, movement to a new
job, or out of the labor force);

 pension events (becoming eligible for plan participation, choosing to
participate, becoming vested, etc.); and  retirement events.

For our report, we specified a DB and DC pension plan, which the PSG
entered into PENSIM to be used with the 1955 and 1970 birth cohorts to
simulate pension benefits for the Baby Boom and Generation X. These

8 For more information on PENSIM go to http:// www. polsim. com/ PENSIM.
html. PENSIM

Appendix I: Scope and Methodology Page 43 GAO- 03- 429 Retirement Income

simulations were conducted under both a sunset and no sunset pension
scenario as well a scenario where Generation X only had access to DC
pensions (see following discussion for more details).

Our simulations assume a single type of DB pension plan for all workers
covered by such a plan. This plan*s structure is similar to the most
common type of DB pension plan 9 in the private sector. 10 In terms of
structure, this plan has an eligibility requirement (consisting of

a minimum age of 21 and 1 year of service) and 5 years cliff vesting. The
plan*s normal retirement age is 62 for workers with any years of service,
and it has an early retirement option, with early retirement benefits
beginning at age 55 for workers with 10 years of service. If a worker
chooses to retire early there is a linear early retirement reduction of 5
percent per year (e. g., if a worker retires at age 55, he would receive
65 percent of the normal retirement benefit). 11 The plan pays a monthly
benefit at retirement, rather than a lump sum.

In terms of the calculation of benefits, the traditional DB plan
calculates benefits using a final average pay formula, such as:

X% * average Y years earnings at the end of career or when highest * years
of service.

Surveys of DB plans in the United States indicate that, typically, the
percentage credit (X%) is in the range of 1- 1. 75 percent. 12 For this
report

9 This section relies on data from the forthcoming report, Martin R.
Holmer and Asa M. Janney III, Policy Simulation Group. Characteristics of
Pension Plans in the United States, 1996- 98, a report prepared at the
request of the U. S. Department of Labor, Employee Benefits Security
Administration, Office of Policy and Research, Feb. 25, 2003. 10 However,
DB plans in the future may differ as firms have been increasingly
switching to cash balance plans. Cash balance plans are a type of DB plan
that combine certain features found in both DB and DC plans. Participants*
benefits are determined by a formula, like a DB plan, but benefits are
expressed as account balances, similar to DC plans. U. S. General
Accounting Office, Cash Balance Plans: Implications for Retirement Income,

GAO/ HEHS- 00- 207 (Washington, D. C.: Sept. 29, 2000) and Answers to Key
Questions About Private Pension Plans, GAO- 02- 745SP (Washington, D. C.:
Sept. 18, 2002). 11 In our simulations all individuals retire at age 62.
12 See U. S. Department of Labor, Bureau of Labor Statistics, Employee
Benefits in Medium and Large Private Establishments, 1997, Bulletin 2517
(Washington, D. C.: Sept. 1999) and U. S. General Accounting Office,
Private Pensions: Implications of Conversions to Cash Blance Plans, GAO/
HEHS- 00- 185 (Washington, D. C.: Sept. 29, 2000). Defined Benefit Plan

Appendix I: Scope and Methodology Page 44 GAO- 03- 429 Retirement Income

we chose 1.25 percent. The most common definition of final average pay is
the high consecutive 5 years of earnings. Therefore, the formula that we
use to calculate DB benefits is:

1.25% * average of high consecutive 5 years pay * years of service. In our
simulations of DC plans, all individuals covered by a DC pension plan are
covered by the same plan. This plan*s structure is similar to the most
common type of DC pension plan 13 in the private sector. 14 In terms of
structure, this plan has an eligibility requirement (consisting of

a minimum age of 21 and 1 year of service) and 5 year graded vesting. 15
At retirement, 16 individuals annuitize their account balances, 17 with
married individuals purchasing a joint and one- half survivor annuity and
single individuals purchasing a single life annuity.

Employees can contribute up to 12 percent of their earnings 18 and the
employer match 50 percent of the employees* contributions up to 5 percent.
19 Employees can invest their contributions in their choice of equities
and fixed income assets, where the fixed income assets will

13 This section relies on data from the forthcoming report, Martin R.
Holmer and Asa M. Janney III, Policy Simulation Group. Characteristics of
Pension Plans in the United States, 1996- 98, a report prepared at the
request of the U. S. Department of Labor, Employee Benefits Security
Administration, Office of Policy and Research, Feb. 25, 2003. 14 This plan
will most likely resemble a 401( k) plan. 15 Graded vesting implies that
an employee*s nonforfeitable percentage of the employer contributions
increases over time until it reaches 100 percent. In our simulations the
nonforfeitable percentage reaches 100 percent after 5 years.

16 In our estimates all individuals retire at age 62. 17 In our
simulations all individuals are assumed to purchase a nominal annuity. 18
The dollar limit on employee contributions is $11,000 for 2002, increasing
by $1,000 per year until reaching $15,000 in 2006 and is then adjusted for
inflation in $500 increments. 19 By law, combined employer and employee
contributions are limited to the lesser of $35,000 or 25 percent of
compensation in 2001. Beginning in 2006, combined contributions will be
limited to the lesser of $40,000 (indexed for inflation) or 100 percent of
compensation. Defined Contribution Plan

Appendix I: Scope and Methodology Page 45 GAO- 03- 429 Retirement Income

consist of Treasury bonds and corporate bonds. 20 Employees who leave
before retirement can choose to have their account balances rolled over
into another retirement account. In our simulations, rollover decisions
are based on the data in table 11.

Assumptions also need to be made regarding participation and contribution
rates, and asset allocation. Tables 8- 11 provide information on the
assumptions used for each of these factors. Table 8 provides data on
participation rates by age and salary.

Table 8: Participation Rates by Age and Salary, 2001 Age <$ 20,000
$20,000-$ 39,999 $40,000-$ 59,999 $60,000-$ 79,999 $80,000-$ 99,999 >$
100,000

<20 17.2% 44.4% a a a a 20- 29 32.1% 65.9% 78.0% 91.2% 93.1% 95.0% 30- 39
45.2% 79.5% 89.0% 94.1% 95.6% 97.0% 40- 49 49.9% 83.2% 88.0% 95.0% 96.8%
97.5% 50- 59 57.7% 85.5% 83.7% 93.8% 96.6% 97.9% 60+ 64.0% 86.7% 83.6%
90.3% 94.7% 96.2% Source: Research Report: How Well are Employees Saving
and Investing in 401( k) Plans, Hewitt Financial Services, 2001.

Note: In order to use these participation rates in our simulations, the
salary categories listed in the table were normalized by dividing by the
average wage index in 2001. a Not applicable. Data on contribution rates
by age and salary are shown in table 9.

Table 9: Contribution Rates by Age and Salary, 1999 Age <$ 20,000 >$
20,000-$ 40,000 >$ 40,000-$ 60,000 >$ 60,000-$ 80,000 >$ 80,000-$ 100, 000
>$ 100,000

20- 29 5.1% 5.3% 6.8% 7.4% 6.8% 4.8% 30- 39 6.4% 6.2% 6.8% 7.2% 6.9% 5.1%
40- 49 6.9% 6.7% 7.1% 7.3% 6.8% 5.0% 50- 59 7.8% 7.6% 8.3% 8.2% 7.3% 5.1%
60+ 9.0% 8.5% 9.3% 9.0% 7.9% 5.1% Source: Contribution Behavior of 401( k)
Plan Participants, Sarah Holden and Jack VanDerhei, ICI Perspective, vol.
7/ no. 4, October 2001 and Research Report: How Well Are Employees Saving
and Investing in 401( k) Plans, Hewitt Financial Services, 2001.

20 The mean nominal rates of return, which all returns varied around, for
each asset class was 6.3 percent for Treasuries, 6.8 percent for corporate
bonds, and 10 percent for equities, consistent with the assumptions used
by the Office of the Chief Actuary at the Social Security Administration.

Appendix I: Scope and Methodology Page 46 GAO- 03- 429 Retirement Income

Note: Since high income individuals are constrained by limits on total
contributions within a given year, and the rates in this table fall at
higher salary levels, we used the data for the >$ 60,000 to $80,000 salary
range for those salaried above $80,000. In order to use these contribution
rates in our simulations, the salary categories listed in the table were
normalized by dividing by the average wage index in 1999.

Table 10 provides data on average asset allocation rates by age and
investment options.

Table 10: Average Asset Allocation Rates by Age and Investment Options,
2000 Age Equity

Funds Balanced Funds Bond

Funds Money Funds

20- 29 77.7% 8.0% 7.1% 5.8% 30- 39 78.7% 8.6% 6.4% 4.7% 40- 49 74.1% 9.7%
7.7% 6.1% 50- 59 67.4% 10.8% 9.3% 8.4% 60+ 55.8% 12.5% 13.8% 12.4% Source:
404( k) Plan Asset Allocation, Account Balances, and Loan Activity in
2000, Sarah Holden and Jack VanDerhei, ICI Perspectives, vol. 7/ no. 5,
November 2001.

Note: Because the model we used has different investment categories than
those listed in the table, money funds were put into Treasury bonds, bond
funds were put into corporate bonds, and balanced funds were split evenly
between equities and corporate bonds. Percentages in the table are percent
of account balances.

Data on the distribution of assets at termination by asset levels is shown
in table 11.

Table 11: Assets at Termination, 2000 Assets Stayed

in plan Rolled over Cashed

out

<$ 10,000 21% 48% 32% $10,000-$ 49,999 62% 27% 11% $50,000-$ 99,999 69%
27% 4% $100,000-$ 199, 999 69% 28% 2% $200,000+ 69% 29% 2% Source:
Building Futures: How Workplace Savings are Shaping the Future of
Retirement, Fidelity Investments, 2001. Note: In our simulations, if a job
ends without disability or retirement, the individual has the choice to
rollover the funds to another retirement account. The percentages in the
cashed out category were used as the probability of not rolling the funds
into another retirement account at termination. Also, the dollar amounts
were normalized by dividing by the average wage index in 2000.

Appendix I: Scope and Methodology Page 47 GAO- 03- 429 Retirement Income

Our simulations considered several scenarios for pension benefits. One
assumed that the sunset provision in the Economic Growth and Tax Relief
Reconciliation Act (EGTRRA) of 2001 holds 21 and the other that the
provisions in EGTRRA, which raise the limits on both DB and DC plans, do
not sunset. 22 We also considered the scenario where the shift in coverage
reached its extreme and Generation X only had access to DC plans.

Our simulations of expected Social Security benefits consider two
different scenarios 23 for resolving the funding shortfall. One scenario
assumes scheduled benefits are paid while payroll taxes are increased to
levels that support those benefits. Our scheduled benefits scenario
increases the payroll tax once and immediately by the amount of the OASDI
actuarial deficit as a percent of payroll so that benefits under the
current system can continue to be paid throughout the simulation period.

The other scenario, the funded benefits scenario, assumes that benefits
are reduced to levels supportable by current payroll tax rates. The
benefit reductions used in this scenario reduce the primary insurance
amount (PIA) formula factors by equal percentage point reductions (by
0.319 each year for 30 years) for those newly eligible in 2005, subjecting
earnings across all segments of the PIA formula to the same reduction.
Simulating retirement income almost 30 years into the future requires

many assumptions and simplifications and, consequently, our simulations
have a number of limitations. A primary limitation of our analysis is that
our simulations do not include important components of retirement income
such as personal savings, earnings in retirement, health benefits,

21 The sunset provision would return any changes made under EGTRRA to
their previous levels. 22 See appendix II for figures and tables showing
the level of real retirement income, replacement rates, and distributional
statistics for the no sunset scenario. 23 For additional information on
the benchmarks, see U. S. General Accounting Office, Social Security:
Program*s Role in Helping Ensure income Adequacy, GAO- 02- 62 (Washington,

D. C.: Nov. 30, 2001) and Social Security Reform: Analysis of Reform
Models Developed by the President*s Commission to Strengthen Social
Security, GAO- 03- 310 (Washington, D. C.: Jan. 15, 2003). Alternative
Scenarios for

Pensions and Social Security

Pensions Social Security Assumptions and

Limitations of the Simulation Analysis

Appendix I: Scope and Methodology Page 48 GAO- 03- 429 Retirement Income

and other public assistance programs such as SSI. Including personal
savings might reduce retirement income for Generation X relative to
retirement income for the Baby Boom if the post- 1980 decline in personal
savings rates continues. 24 Including earnings in retirement might
increase Generation X*s retirement income relative to the Boomers income
if wages increase over time or if people in the future are more likely to
work in retirement. From a distributional perspective, including personal
savings would probably increase the upper quintile*s share of retirement
income 25 while including public assistance programs such as SSI would
benefit the

bottom of the distribution. Another component of well- being in retirement
that we do not estimate are private and public health benefits. Including
health benefits might reduce Generation X*s standard of living in
retirement relative to the Baby Boom due to falling health benefits and
rising health care costs over time An important assumption driving our
results is that real wages grow over

time. We assume real wages grow at 1.0 percent per year, following the
2001 Social Security Trustees Report*s 26 intermediate assumption. If,
instead, wages stagnate as in the 1980s and 1990s, then retirement income
for Generation X relative to retirement income for the Baby Boom might

be lower than our estimates. Another critical assumption is the relative
rate of DB and DC pension coverage. Over the last 25 years pension
coverage has been shifting from DB to DC pensions. However, due to the
uncertainty in predicting future

relative coverage rates, our simulations either assume a constant rate of
DB and DC coverage over time or only DC coverage for Generation X. The
likely outcome is somewhere in between.

24 On the other hand, over the same period household net worth increased
potentially offsetting the impact of reduced saving rates on eventual
assets in retirements. See U. S. General Accounting Office, National
Saving: Answers to Key Questions, GAO- 01- 591SP (Washington, D. C.: June
2001).

25 According to one analysis of the Survey of Consumer Finances, the top
10 percent of the wealth distribution held nearly 70 percent of all
wealth. Arthur B. Kennickell, An Examination of Changes in the
Distribution of Wealth from 1989 to 1998: Evidence from the Survey of
Consumer Finances, Federal Reserve Board (June 2000).

26 The Board of Trustees, Federal Old- Age and Surviviors Insurance and
Disability Insurance Trust Funds, The 2001 Annual Report of the Board of
Trustees of the Federal Old- Age and Survivors Insurance and Disability
Insurance Trust Funds (Washington, D. C.: Mar. 19, 2001).

Appendix I: Scope and Methodology Page 49 GAO- 03- 429 Retirement Income

An important omission under the scheduled Social Security benefit scenario
is the impact of higher taxes or general revenue transfers on other
sources of retirement income. Increased taxes or general revenue transfers
will most likely be necessary to pay Social Security benefits as

scheduled under current law. Tax increases might reduce saving for
retirement and general revenue transfers might reduce funding for other
government retirement programs such as SSI, Medicare, or Medicaid. The
impact of tax increases may be larger for Generation X than for the Baby
Boom because they will pay higher taxes for more years.

Another limitation is the sensitivity of estimated DC benefits to our
assumptions about future rates of return. We assume individuals* rates of
returns vary randomly around average rates projected by the Office of the

Chief Actuary at SSA. 27 If average rates of return in the future are
significantly different, then actual DC benefits could differ
substantially from our simulations. While the model allows returns to vary
stochastically by individuals, it cannot capture fluctuations in overall
market rates of return. An ill timed stock market downturn could result in
either generation*s DC benefits being significantly lower than simulated.
Retirement income for Generation X could be more sensitive to future rates
of return than retirement income for the Baby Boom, if the trend toward DC
pensions continues.

Another limiting assumption is that our simulations only include one kind
of DB and DC plan, which clearly does not capture the full complexity of
pension plans. 28 We attempted to choose the characteristics of each to be
typical of today*s pension plans. If they are not truly representative or
if the characteristics of DB and DC plans change over time, then our
results could be biased. In particular, the finding that the shift to DC
plans only has a very modest effect on pension benefits may depend on our
choice of plans.

While educational attainment has been increasing over time, this is not
captured by the simulations. Both generations are assumed to achieve the
same level of education as 35- to 44- year olds in the 1997 Current
Population Survey. Higher levels of education for Generation X could
increase their retirement income relative to the Baby Boom.

27 The mean nominal rates of return, which all returns varied around for
each asset class was 6.3 percent for Treasuries, 6.8 percent for corporate
bonds, and 10 percent for equities. 28 We did not examine the relative
generosity of our DB and DC plans.

Appendix I: Scope and Methodology Page 50 GAO- 03- 429 Retirement Income

From a distributional perspective, the simulations are limited, in that
they do not capture differences across the generations in the variation of
earnings. By some measures, earnings disparity has been increasing over
the last 20 years, 29 which could potentially lead to more variation in

retirement income for Generation X. The simulations assume the same cohort
life expectancies as the 2001 Social Security Trustees Report*s
intermediate cost projection. Marital status at age 62 is calibrated to
unpublished projections from the SSA*s Office of the Chief Actuary.
Assumed life expectancies may be too low, as some have argued that the
Trustees underestimate future improvements in

mortality rates. 30 Increased life expectancies would reduce DC benefits
in our simulations because retirees would have to pay higher prices when
annuitizing their retirement accounts.

Our simulations of retirement income do not take taxation into account.
Incorporating taxes would not only lower disposable income, but would also
reduce variation in income because federal tax rates are progressive and
because only relatively higher income households are required to pay tax
on their Social Security benefits. Finally, we are only able to simulate
retirement income for two illustrative

birth cohorts as opposed to entire generations. The 1955 and 1970 birth 29
Since the late 1960s inequality in individual earnings has been increasing
as measured by Gini coefficients and the ratio of the 90th percentile to
the 10th percentile. From the late 1960s to the early 1990s inequality in
household income increased as measured by the share of aggregate income by
income quintile. U. S. Bureau of the Census, The Changing Shape of the
Nation*s Income Distribution 1947- 1998, Current Population Reports P60-
204 (Washington, D. C.: June 2000).

30 Social Security Advisory Board, The 1999 Technical Panel on Assumptions
and Methods: Report to the Social Security Advisory Board, (Nov. 1999).

Appendix I: Scope and Methodology Page 51 GAO- 03- 429 Retirement Income

cohorts may not fully capture the experiences of the Baby Boom and
Generation X, respectively.

Appendix II: Alternative Scenarios Page 52 GAO- 03- 429 Retirement Income

For our analysis of estimated retirement income, we used two different
scenarios for the changes to the pension limits under EGTRRA. One assumed
that the sunset provision in EGTRRA holds and the other that the
provisions, which raise the limits on both DB and DC plans, do not sunset.

The following tables show estimated retirement income under the nosunset
pension scenario. Extending pension contribution limits beyond 2010
increases real retirement income and replacement rates for Generation X
relative to real retirement income and replacement rates for the Baby
Boom.

Table 12 shows the estimated median monthly household retirement income at
age 62 under a scheduled (tax increase) Social Security scenario and a
constant rate of DB and DC pension coverage.

Table 12: Median Monthly Household Retirement Income and its Major
Components, at Age 62, if Social Security Shortfall Addressed by
Increasing Revenues

Baby Boom Generation X

Retirement income $3,156 $3,481 Pension income (DB and DC) $966 $1015
Social Security benefits $1,366 $1,549 Source: GEMINI/ PENSIM. Note:
Median values at age 62 discounted to 2001 dollars and DC account balances
annuitized at

retirement. Not all components of retirement income are shown. Pension
income is measured across all individuals in the cohort. Median pension
income for those covered by a pension is $1,509 for the Baby Boom and
$1,589 for Generation X. The rates of return for DC pension contributions
vary over time and by individual. Median spousal earnings for those
spouses working are $3,295 for the Baby

Boom and $3,375 for Generation X.

Estimated median monthly household retirement income at age 62 under a
funded (benefit reduction) Social Security scenario and a constant rate of
DB and DC pension coverage is shown in table 13. Appendix II: Alternative
Scenarios

Retirement Income Under the No- Sunset Pension Scenario

Appendix II: Alternative Scenarios Page 53 GAO- 03- 429 Retirement Income

Table 13: Median Monthly Household Retirement Income and its Major
Components, at Age 62, if Social Security Shortfall addressed by Reducing
Benefits Baby Boom Generation X

Retirement income $3,021 $3,110 Pension income (DB and DC) $966 $1015
Social Security benefits $1,234 $1,199 Source: GEMINI/ PENSIM. Note:
Median values at age 62 discounted to 2001 dollars and DC account balances
annuitized at

retirement. Not all components of retirement income are shown. Pension
income is measured across all individuals in the cohort. Median pension
income for those covered by a pension is $1,509 for the Baby Boom and
$1,589 for Generation X. The rates of return for DC pension contributions
vary over time and by individual. Median spousal earnings for those
spouses working are $3,295 for the Baby

Boom and $3,375 for Generation X.

Table 14 shows the simulated median monthly household retirement income at
age 62 under a funded (benefit reduction) Social Security scenario and
Generation X having only DC pension coverage. Table 14: Median Monthly
Household Retirement Income and its Major

Components, at Age 62, if Social Security Shortfall Addressed by Reducing
Benefits and Generation X Having Only DC Pension Plans

Baby Boom Generation X

Retirement income $3,021 $3,195 Pension income (DB and DC) $966 $1065
Social Security benefits $1,234 $1,199 Source: GEMINI/ PENSIM. Note:
Median values at age 62 discounted to 2001 dollars and DC account balances
annuitized at

retirement. Not all components of retirement income are shown. Pension
income is measured across all individuals in the cohort. Median pension
income for those covered by a pension is $1,509 for the Baby Boom and
$1,835 for Generation X. The rates of return for DC pension contributions
vary over time and by individual. Median spousal earnings for those
spouses working are $3,295 for the Baby

Boom and $3,375 for Generation X.

Replacement rates for the Baby Boom and Generation X under the different
Social Security and pension coverage scenarios are shown in table 15.

Appendix II: Alternative Scenarios Page 54 GAO- 03- 429 Retirement Income

Table 15: Median Household Replacement Rates for Baby Boom and Generation
X Baby Boom Generation X

Social Security Tax Increase Scenario, constant DB/ DC 74.9% 70.9% Social
Security Benefit Reduction Scenario, constant DB/ DC 71.0% 63.3% Social
Security Benefit Reduction Scenario, Generation X only has DC 71.0% 62.5%
Source: GEMINI/ PENSIM. Note: The replacement rate is calculated as
retirement income at age 62 divided by earnings at age

61 for retired workers who worked at age 61 and whose spouses, if married,
were the same age.

The distribution of simulated retirement income is very similar across the
generations and across scenarios. For both generations and in all
scenarios, retirement income is estimated to vary widely, pension benefits
are less evenly distributed than Social Security benefits, and the less
educated, single women, and those without pensions have lower retirement
incomes.

Figures 16- 20 and table 16 show the estimated distribution of retirement
income for the Baby Boom assuming funded Social Security benefits, no
extension of raised pension contribution limits beyond 2010, and a
constant rate of DB and DC pension coverage over time. These are the same
assumptions used for Generation X in figures 11- 15 and table 7. We do not
emphasize a comparison of the distributions across generations because our
models do not capture differences across generations in the variation of
earnings. By some measure earnings disparity has been increasing over the
last 20 years, 1 which may result in retirement income varying more in
Generation X than in the Baby Boom.

1 U. S. Bureau of the Census, The Changing Shape of the Nation*s Income
Distribution 1947- 1998, Current Population Reports: P60- 204 (Washington,
D. C.: June 2000). Distributional Figures

and Tables for the Baby Boom and for Generation X under Alternative
Scenarios

Appendix II: Alternative Scenarios Page 55 GAO- 03- 429 Retirement Income

Figure 16: Proportion of Household Retirement Income for Each Quintile of
the Retirement Income Distribution at Age 62 for the Baby Boom

Note: Retirement income includes Social Security benefits, pension
benefits, and earnings of younger spouses. Single individuals include
those divorced, widowed, or never married at age 62. Simulations assume
all workers retire completely at age 62, Social Security benefits are
reduced to funded levels, no extension of raised pension contribution
limits, and constant rates of coverage over time for DB and DC pensions.

0 10

20 30

40 50

60 70

Top 20% Fourth quintile Third quintile Second quintile Bottom 20%
Percentage of income

Married at age 62 Single at age 62 Source: GEMINI/ PENSIM.

Retirement income quintiles

Appendix II: Alternative Scenarios Page 56 GAO- 03- 429 Retirement Income

Figure 17: Proportion of Household Pension Benefits and Household Social
Security Benefits for Each Quintile of the Pension Benefit and Social
Security Benefit Distributions at Age 62 for the Baby Boom

Note: Retirement income includes Social Security benefits, pension
benefits, and earnings of younger spouses. Single individuals include
those divorced, widowed, or never married at age 62. Simulations assume
all workers retire completely at age 62, Social Security benefits are
reduced to funded levels, no extension of raised pension contribution
limits, and constant rates of coverage over time for DB and DC pensions.

Percentage of benefits

Source: GEMINI/ PENSIM.

Pension benefit quintiles 0

10 20

30 40

50 60

70 Top 20% Fourth quintile Third quintile Second quintile Bottom 20%

Percentage of benefits

Married at age 62 Single at age 62

Social Security benefit quintiles 0

10 20

30 40

50 60

70 Top 20% Fourth quintile Third quintile Second quintile Bottom 20%

Appendix II: Alternative Scenarios Page 57 GAO- 03- 429 Retirement Income

Figure 18: Median Monthly Household Retirement Income at Age 62 by Pension
Status for the Baby Boom

Note: Retirement income includes Social Security benefits, pension
benefits, and earnings of younger spouses. Single individuals include
those divorced, widowed, or never married at age 62. Simulations assume
all workers retire completely at age 62, Social Security benefits are
reduced to funded levels, no extension of raised pension contribution
limits, and constant rates of coverage over time for DB and DC pensions

0 1,000

2,000 3,000

4,000 5,000

Z Y X Single at age 62 Married at age 62 Median value in 2001 dollars

Household receives no pension benefits Household receives pension benefits
Source: GEMINI/ PENSIM.

Appendix II: Alternative Scenarios Page 58 GAO- 03- 429 Retirement Income

Figure 19: Median Monthly Household Retirement Income at Age 62 by
Educational Attainment for the Baby Boom

Note: Retirement income includes Social Security benefits, pension
benefits, and earnings of younger spouses. Single individuals include
those divorced, widowed, or never married at age 62. Simulations assume
all workers retire completely at age 62, Social Security benefits are
reduced to funded levels, no extension of raised pension contribution
limits, and constant rates of coverage over time for DB and DC pensions.
Educational attainment for married couples is defined as the attainment of
the Baby Boom cohort member* the spouse may have attained a different
level of education.

Median value in 2001 dollars

Married at age 62 Single at age 62 Source: GEMINI/ PENSIM.

0 1,000

2,000 3,000

4,000 5,000

Graduate degree College graduate Some college

High School graduate High School dropout

0 1000

2000 3000

4000 5000

Graduate degree College graduate Some college

High School graduate High School dropout

Appendix II: Alternative Scenarios Page 59 GAO- 03- 429 Retirement Income

Figure 20: Median Monthly Retirement Income at Age 62 by Gender for Single
Person Households for the Baby Boom

Note: Retirement income includes Social Security and pension benefits.
Single individuals include those divorced, widowed, or never married at
age 62. Simulations assume all workers retire completely at age 62, Social
Security benefits are reduced to funded levels, no extension of raised
pension contribution limits, and constant rates of coverage over time for
DB and DC pensions.

Table 16: Median Monthly Household Retirement Income at Age 62 by Marital
Status for the Baby Boom, in 2001 Dollars

Household income Income per household member

Never married $1,546 $1,546 Married $3,783 $1,891 Widowed $2,039 $2,039
Divorced $1,399 $1,399 Source: GEMINI/ PENSIM. Note: Retirement income
includes Social Security benefits, pension benefits, and earnings of
younger

spouses. Single individuals include those divorced, widowed, or never
married at age 62. Simulations assume all workers retire completely at age
62, Social Security benefits are reduced to funded levels, no extension of
raised pension contribution limits, and constant rates of coverage over
time for DB and DC pensions.

Figures 21- 25 and table 17 show the estimated distribution of retirement
income for Generation X assuming funded Social Security benefits, no
extension of raised pension contribution limits beyond 2010, and all
pensions are DC pensions.

Median value in 2001 dollars

Source: GEMINI/ PENSIM.

0 500

1,000 1,500

2,000 2,500

Z Y X W V Single female Single male

Appendix II: Alternative Scenarios Page 60 GAO- 03- 429 Retirement Income

Figure 21: Proportion of Household Retirement Income for Each Quintile of
the Retirement Income Distribution at Age 62 for Generation X When All
Pensions Are DC Pensions

Note: Retirement income includes Social Security benefits, pension
benefits, and earnings of younger spouses. Single individuals include
those divorced, widowed, or never married at age 62. Simulations assume
all workers retire completely at age 62, Social Security benefits are
reduced to funded levels, no extension of raised pension contribution
limits, and employers with pension plans only offer DC pensions.

0 10

20 30

40 50

60 70

Top 20% Fourth quintile Third quintile Second quintile Bottom 20%
Percentage of income

Married at age 62 Single at age 62 Source: GEMINI/ PENSIM.

Retirement income quintiles

Appendix II: Alternative Scenarios Page 61 GAO- 03- 429 Retirement Income

Figure 22: Proportion of Household Pension Benefits and Household Social
Security Benefits for Each Quintile of the Pension Benefit and Social
Security Benefit Distributions at Age 62 for Generation X When all
Pensions are DC Pensions

Note: Retirement income includes Social Security benefits, pension
benefits, and earnings of younger spouses. Single individuals include
those divorced, widowed, or never married at age 62. Simulations assume
all workers retire completely at age 62, Social Security benefits are
reduced to funded levels, no extension of raised pension contribution
limits, and employers with pension plans only offer DC pensions.

Percentage of benefits

Source: GEMINI/ PENSIM.

Pension benefit quintiles 0

10 20

30 40

50 60

70 Top 20% Fourth quintile Third quintile Second quintile Bottom 20%

Percentage of benefits

Married at age 62 Single at age 62

Social Security benefit quintiles 0

10 20

30 40

50 60

70 Top 20% Fourth quintile Third quintile Second quintile Bottom 20%

Appendix II: Alternative Scenarios Page 62 GAO- 03- 429 Retirement Income

Figure 23: Median Monthly Household Retirement Income at Age 62 by Pension
Status for Generation X When All Pensions Are DC Pensions

Note: Retirement income includes Social Security benefits, pension
benefits, and earnings of younger spouses. Single individuals include
those divorced, widowed, or never married at age 62. Simulations assume
all workers retire completely at age 62, Social Security benefits are
reduced to funded levels, no extension of raised pension contribution
limits, and employers with pension plans only offer DC pensions.

0 1,000

2,000 3,000

4,000 5,000

Z Y X Single at age 62 Married at age 62 Median value in 2001 dollars

Household receives no pension benefits Household receives pension benefits
Source: GEMINI/ PENSIM.

Appendix II: Alternative Scenarios Page 63 GAO- 03- 429 Retirement Income

Figure 24: Median Monthly Household Retirement Income at Age 62 by
Educational Attainment for Generation X When All Pensions Are DC Pensions

Note: Retirement income includes Social Security benefits, pension
benefits, and earnings of younger spouses. Single individuals include
those divorced, widowed, or never married at age 62. Simulations assume
all workers retire completely at age 62, Social Security benefits are
reduced to funded levels, no extension of raised pension contribution
limits, and employers with pension plans only offer DC pensions.
Educational attainment for married couples is defined as the attainment of
the Baby Boom cohort member* the spouse may have attained a different
level of education.

Median value in 2001 dollars

Married at age 62 Single at age 62 Source: GEMINI/ PENSIM.

0 1,000

2,000 3,000

4,000 5,000

Graduate degree College graduate Some college

High School graduate High School dropout

0 1000

2000 3000

4000 5000

Graduate degree College graduate Some college

High School graduate High School dropout

Appendix II: Alternative Scenarios Page 64 GAO- 03- 429 Retirement Income

Figure 25: Median Monthly Retirement Income at Age 62 by Gender for Single
Person Households for Generation X When All Pensions are DC Pensions

Note: Retirement income includes Social Security and pension benefits.
Single individuals include those divorced, widowed, or never married at
age 62. Simulations assume all workers retire completely at age 62, Social
Security benefits are reduced to funded levels, no extension of raised
pension contribution limits, and employers with pension plans only offer
DC pensions.

Table 17: Median Monthly Household Retirement Income at Age 62 by Marital
Status for Generation X When All Pensions are DC Pensions, in 2001 Dollars

Household income Income per household member

Never married $1,528 $1,528 Married $3,892 $1,946 Widowed $2,145 $2,145
Divorced $1,358 $1,358 Source: GEMINI/ PENSIM. Note: Retirement income
includes Social Security benefits, pension benefits, and earnings of
younger

spouses. Simulations assume all workers retire completely at age 62,
Social Security benefits are reduced to funded levels, no extension of
raised pension contribution limits, and employers with pension plans only
offer DC pensions.

Figures 26- 30 and table 18 show the estimated distribution of retirement
income for Generation X assuming funded Social Security benefits,
extension of raised pension contribution limits beyond 2010, and a
constant rate of DB and DC pension coverage over time.

Median value in 2001 dollars

Source: GEMINI/ PENSIM.

0 500

1,000 1,500

2,000 2,500

Z Y X W V Single female Single male

Appendix II: Alternative Scenarios Page 65 GAO- 03- 429 Retirement Income

Figure 26: Proportion of Household Retirement Income for Each Quintile of
the Retirement Income Distribution at Age 62 for Generation X with
Extension of Raised Pension Contribution Limits Note: Retirement income
includes Social Security benefits, pension benefits, and earnings of
younger

spouses. Single individuals include those divorced, widowed, or never
married at age 62. Simulations assume all workers retire completely at age
62, Social Security benefits are reduced to funded levels, extension of
raised pension contribution limits, and constant rates of coverage over
time for DB and DC pensions.

0 10

20 30

40 50

60 70

Top 20% Fourth quintile Third quintile Second quintile Bottom 20%
Percentage of income

Married at age 62 Single at age 62 Source: GEMINI/ PENSIM.

Retirement income quintiles

Appendix II: Alternative Scenarios Page 66 GAO- 03- 429 Retirement Income

Figure 27: Proportion of Household Pension Benefits and Household Social
Security Benefits for Each Quintile of the Pension Benefit and Social
Security Benefit Distributions at Age 62 for Generation X with Extension
of Raised Pension Contribution Limits

Note: Retirement income includes Social Security benefits, pension
benefits, and earnings of younger spouses. Single individuals include
those divorced, widowed, or never married at age 62. Simulations assume
all workers retire completely at age 62, Social Security benefits are
reduced to funded levels, extension of raised pension contribution limits,
and constant rates of coverage over time for DB and DC pensions.

Percentage of benefits

Source: GEMINI/ PENSIM.

Pension benefit quintiles 0

10 20

30 40

50 60

70 Top 20% Fourth quintile Third quintile Second quintile Bottom 20%

Percentage of benefits

Married at age 62 Single at age 62

Social Security benefit quintiles 0

10 20

30 40

50 60

70 Top 20% Fourth quintile Third quintile Second quintile Bottom 20%

Appendix II: Alternative Scenarios Page 67 GAO- 03- 429 Retirement Income

Figure 28: Median Monthly Household Retirement Income at Age 62 by Pension
Status for Generation X with Extension of Raised Pension Contribution
Limits

Note: Retirement income includes Social Security benefits, pension
benefits, and earnings of younger spouses. Single individuals include
those divorced, widowed, or never married at age 62. Simulations assume
all workers retire completely at age 62, Social Security benefits are
reduced to funded levels, extension of raised pension contribution limits,
and constant rates of coverage over time for DB and DC pensions.

0 1,000

2,000 3,000

4,000 5,000

Z Y X Single at age 62 Married at age 62 Median value in 2001 dollars

Household receives no pension benefits Household receives pension benefits
Source: GEMINI/ PENSIM.

Appendix II: Alternative Scenarios Page 68 GAO- 03- 429 Retirement Income

Figure 29: Median Monthly Household Retirement Income at Age 62 by
Educational Attainment for Generation X with Extension of Raised Pension
Contribution Limits Note: Retirement income includes Social Security
benefits, pension benefits, and earnings of younger

spouses. Single individuals include those divorced, widowed, or never
married at age 62. Simulations assume all workers retire completely at age
62, Social Security benefits are reduced to funded levels, extension of
raised pension contribution limits, and constant rates of coverage over
time for DB and DC pensions. Educational attainment for married couples is
defined as the attainment of the Generation X birth cohort member* the
spouse may have attained a different level of education.

Median value in 2001 dollars

Married at age 62 Single at age 62 Source: GEMINI/ PENSIM.

0 1,000

2,000 3,000

4,000 5,000

Graduate degree College graduate Some college

High School graduate High School dropout

0 1000

2000 3000

4000 5000

Graduate degree College graduate Some college

High School graduate High School dropout

Appendix II: Alternative Scenarios Page 69 GAO- 03- 429 Retirement Income

Figure 30: Median Monthly Retirement Income at Age 62 by Gender for Single
Person Households for Generation X with Extension of Raised Pension
Contribution Limits Note: Retirement income includes Social Security and
pension benefits. Single individuals include

those divorced, widowed, or never married at age 62. Simulations assume
all workers retire completely at age 62, Social Security benefits are
reduced to funded levels, extension of raised pension contribution limits,
and constant rates of coverage over time for DB and DC pensions.

Table 18: Median Monthly Household Retirement Income at Age 62 by Marital
Status for Generation X with Extension of Raised Pension Contribution
Limits, in 2001 Dollars

Household income Income per household member

Never Married $1,598 $1,598 Married $3,912 $1,956 Widowed $2,108 $2,108
Divorced $1,403 $1,403 Source: GEMINI/ PENSIM. Note: Retirement income
includes Social Security benefits, pension benefits, and earnings of
younger

spouses. Simulations assume all workers retire completely at age 62,
Social Security benefits are reduced to funded levels, extension of raised
pension contribution limits, and constant rates of coverage over time for
DB and DC pensions.

Figures 31- 35 and table 19 show the estimated distribution of retirement
income for Generation X assuming scheduled Social Security benefits, no
Median value in 2001 dollars

Source: GEMINI/ PENSIM.

0 500

1,000 1,500

2,000 2,500

Z Y X W V Single female Single male

Appendix II: Alternative Scenarios Page 70 GAO- 03- 429 Retirement Income

extension of raised pension contribution limits beyond 2010, and a
constant rate of DB and DC pension coverage over time.

Figure 31: Proportion of Household Retirement Income for Each Quintile of
the Retirement Income Distribution at Age 62 for Generation X with
Scheduled Social Security Benefits

Note: Retirement income includes Social Security benefits, pension
benefits, and earnings of younger spouses. Single individuals include
those divorced, widowed, or never married at age 62. Simulations assume
all workers retire completely at age 62, Social Security benefits are paid
as scheduled under current law, no extension of raised pension
contribution limits, and constant rates of coverage over time for DB and
DC pensions.

0 10

20 30

40 50

60 70

Top 20% Fourth quintile Third quintile Second quintile Bottom 20%
Percentage of income

Married at age 62 Single at age 62 Source: GEMINI/ PENSIM.

Retirement income quintiles

Appendix II: Alternative Scenarios Page 71 GAO- 03- 429 Retirement Income

Figure 32: Proportion of Household Pension Benefits and Household Social
Security Benefits for Each Quintile of the Pension Benefit and Social
Security Benefit Distributions at Age 62 for Generation X with Scheduled
Social Security Benefits

Note: Retirement income includes Social Security benefits, pension
benefits, and earnings of younger spouses. Single individuals include
those divorced, widowed, or never married at age 62. Simulations assume
all workers retire completely at age 62, Social Security benefits are paid
as scheduled under current law, no extension of raised pension
contribution limits, and constant rates of coverage over time for DB and
DC pensions.

Percentage of benefits

Source: GEMINI/ PENSIM.

Pension benefit quintiles 0

10 20

30 40

50 60

70 Top 20% Fourth quintile Third quintile Second quintile Bottom 20%

Percentage of benefits

Married at age 62 Single at age 62

Social Security benefit quintiles 0

10 20

30 40

50 60

70 Top 20% Fourth quintile Third quintile Second quintile Bottom 20%

Appendix II: Alternative Scenarios Page 72 GAO- 03- 429 Retirement Income

Figure 33: Median Monthly Household Retirement Income at Age 62 by Pension
Status for Generation X with Scheduled Social Security Benefits

Note: Retirement income includes Social Security benefits, pension
benefits, and earnings of younger spouses. Single individuals include
those divorced, widowed, or never married at age 62. Simulations assume
all workers retire completely at age 62, Social Security benefits are paid
as scheduled under current law, no extension of raised pension
contribution limits, and constant rates of coverage over time for DB and
DC pensions.

0 1,000

2,000 3,000

4,000 5,000

Z Y X Single at age 62 Married at age 62 Median value in 2001 dollars

Household receives no pension benefits Household receives pension benefits
Source: GEMINI/ PENSIM.

Appendix II: Alternative Scenarios Page 73 GAO- 03- 429 Retirement Income

Figure 34: Median Monthly Household Retirement Income at Age 62 by
Educational Attainment for Generation X with Scheduled Social Security
Benefits

Note: Retirement income includes Social Security benefits, pension
benefits, and earnings of younger spouses. Single individuals include
those divorced, widowed, or never married at age 62. Simulations assume
all workers retire completely at age 62, Social Security benefits are paid
as scheduled under current law, no extension of raised pension
contribution limits, and constant rates of coverage over time for DB and
DC pensions. Educational attainment for married couples is defined as the

attainment of the Baby Boom cohort member* the spouse may have attained a
different level of education.

Median value in 2001 dollars

Married at age 62 Single at age 62 Source: GEMINI/ PENSIM.

0 1,000

2,000 3,000

4,000 5,000

Graduate degree College graduate Some college

High School graduate High School dropout

0 1000

2000 3000

4000 5000

Graduate degree College graduate Some college

High School graduate High School dropout

Appendix II: Alternative Scenarios Page 74 GAO- 03- 429 Retirement Income

Figure 35: Median Monthly Retirement Income at Age 62 by Gender for
Generation X for Single Person Households with Scheduled Social Security
Benefits

Note: Retirement income includes Social Security and pension benefits.
Single individuals include those divorced, widowed, or never married at
age 62. Simulations assume all workers retire completely at age 62, Social
Security benefits are paid as scheduled under current law, no extension of
raised pension contribution limits, and constant rates of coverage over
time for DB and DC pensions.

Table 19: Median Monthly Household Retirement Income at Age 62 by Marital
Status for Generation X with Scheduled Social Security Benefits, in 2001
Dollars

Household income Income per household member

Never Married $1,810 $1,810 Married $4,190 $2,095 Widowed $2,306 $2,306
Divorced $1,622 $1,622 Source: GEMINI/ PENSIM. Note: Retirement income
includes Social Security benefits, pension benefits, and earnings of
younger

spouses. Simulations assume all workers retire completely at age 62,
Social Security benefits are paid as scheduled under current law, no
extension of raised pension contribution limits, and constant rates of
coverage over time for DB and DC pensions

Median value in 2001 dollars

Source: GEMINI/ PENSIM.

0 500

1,000 1,500

2,000 2,500

Z Y X W V Single female Single male

Appendix III: GAO Contacts and Staff Acknowledgments

Page 75 GAO- 03- 429 Retirement Income

Alicia Puente Cackley (202) 512- 7022 Barbara Smith (202) 512- 3651 In
addition to those named above, the following individuals made significant
contributions to this report: Michael J. Collins, Gordon Mermin, Janice
Peterson, Brendan Cushing- Daniels, Barbara Alsip and Patrick DiBattista,
Education, Workforce, and Income Security Issues; Grant Mallie, Applied
Research and Methods; and Marylynn Sergent, Strategic Issues. Appendix
III: GAO Contacts and Staff

Acknowledgments GAO Contacts Staff Acknowledgments

Related GAO Products Page 76 GAO- 03- 429 Retirement Income

Social Security Reform: Analysis of Reform Models Developed by the
President*s Commission to Strengthen Social Security. GAO- 03- 310.
Washington, D. C.: January 15, 2003.

Social Security: Analysis of Issues and Selected Reform Proposals.

GAO- 03- 376T. Washington, D. C.: January 15, 2003.

Private Pensions: Participants Need Information on the Risks of Investing
in Employer Securities and the Benefits of Diversification.

GAO- 02- 943. Washington, D. C.: September 6, 2002.

Private Pensions: Improving worker Coverage and Benefits. GAO- 02- 225.
Washington, D. C.: April 9, 2002.

Private Pensions: Key Issues to Consider Following the Enron Collapse.
GAO- 02- 480T. Washington, D. C.: February 27, 2002.

Social Security: Program*s Role in Helping Ensure Income Adequacy.

GAO- 02- 62. Washington, D. C.: November 30, 2001.

Private Pensions: Issues of Coverage and Increasing Contribution Limits
for Defined Contribution Plans. GAO- 01- 846. Washington, D. C.: September
17, 2001.

Retirement Savings: Opportunities to Improve DOL*s SAVER Act Campaign.
GAO- 01- 634. Washington, D. C.: June 26, 2001.

National Saving: Answers to Key Questions. GAO- 01- 591SP. Washington D.
C.: June 1, 2001.

Cash Balance Plans: Implications for Retirement Income.

GAO/ HEHS- 00- 207. Washington, D. C.: September 29, 2000.

Private Pensions: Implications of Conversions to Cash Balance Plans.

GAO/ HEHS- 00- 185. Washington, D. C.: September 29, 2000.

Social Security Reform: Implications for Private Pensions.

GAO/ HEHS- 00- 187. Washington, D. C.: September 14, 2000.

Pension Plans: Characteristics of Persons in the Labor Force Without
Pension Coverage. GAO/ HEHS- 00- 131. Washington, D. C.: August 22, 2000.
Related GAO Products

Related GAO Products Page 77 GAO- 03- 429 Retirement Income

Social Security: Evaluating Reform Proposals. GAO/ AIMD/ HEHS- 00- 29.
Washington, D. C.: November 4, 1999. Integrating Pensions and Social
Security: Trends Since 1986 Tax Law

Changes. GAO/ HEHS- 98- 191R. Washington, D. C.: July 6, 1998.

Social Security: Different Approaches for Addressing Program Solvency.

GAO/ HEHS- 98- 33. Washington, D. C.: July 22, 1998.

401( k) Pension Plans: Loan Provisions Enhance Participation But May
Affect Income Security for Some. GAO/ HEHS- 98- 5. Washington, D. C.:
October 1, 1997.

Retirement Income: Implications of Demographic Trends for Social Security
and Pension Reform. GAO/ HEHS- 97- 81. Washington, D. C.: July 11, 1997.

(130130)

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