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Old 06-04-2017, 02:27 PM   #1
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Fun with Data

A recent thread showed, once again, that this board has a wide range of income and spending levels. Discussions about “what we want/need” often bring up a comment like “The median US household income is something in the low to mid $50k range.”

I know that our retirement income target is based on our desired lifestyle, not on the Jones’s. But, I think it’s fun to look at population statistics just for the dose of reality. (And, because I happen to like data.) So, what is “typical” income for a US retiree?

The mid-50’s above ($56,100 in 2015) combines all households, both workers and retirees, and all size households. 35% of households have only one mouth to feed, 21% have four or more.

That $56,100 comes from the Current Population Survey, which gets lots of data on nearly 70,000 households. Fortunately, the Census Bureau gives us a handy tool for drilling down. https://www.census.gov/cps/data/cpstablecreator.html

I used that. First, I looked at households where the “householder” is 65 or older.
The median income drops to $38,500. That’s quite a bit. Of course, those households are probably smaller.

But, I’m married, so I care about the married couples.
Restricting the data to married couple households, over 65, raises the median all the way to $60,300. Quite a jump.

But, probably too far. “Households” can include children. For older people, those are often adult children living with mom and dad. If those adult children have incomes, they are included in the household income.
Limiting the data to married couples, over 65, with just two persons in the household drops the median down to $56,100. (Look at that, I’m right back where I started.)

But, I’m really interested in retirement income. Some of those couples still have one person w*rking. When I specify the householder is not in the labor force, the median drops to $48,200. And, when I specify that neither is in the labor force, I get $42,200.

That’s the number that’s most like our situation. I can see that we’ve planned for retirement income that is comfortably above the median retired couple.

----

Since I got this far, the next question is “Okay, so where are we on the spectrum”? That led to deciles of income, as follows:

0.90 113,500
0.80 80,600
0.70 63,000
0.60 51,900
0.50 42,200
0.40 35,700
0.30 29,900
0.20 24,700
0.10 18,300

This says that 90% of retired, 65+, couples have incomes below $113,500, 80% are below $80,600, etc.

I can look at this and see that our income is between the .60 and .70, so we’re above median, but not getting into “high” income territory. I think a poll showing the distribution of the couples on this board against that decile grid would be interesting.

And, finally, we’ve all heard that spending drops off with age, what happens to income? Here’s some information on that:

65-69 44,900
70-74 44,000
75-79 41,100
80-84 41,600
85+.. 36,400

Remember, the drop-off is not caused by people dying, because these are all couples.

So, interesting stuff, at least for those of us who like such things.
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Old 06-04-2017, 02:30 PM   #2
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Caveats:

These numbers are “median”, not “mean”. If they look low, you may have seen mean quoted elsewhere. I believe the gap between the two is growing. For the numbers I’ve shown above, the mean is often 1/3 higher than the median.

The Census does not ask for capital gains income. They do ask for SS, pensions, annuities, interest, dividends, rental income, 401k and IRA withdrawals, etc. They say that they think they get better responses for the regular income sources. They redesigned their questionnaire a few years ago to try to improve their capture of the other items, but still think they are missing stuff. Probably actual incomes are a little higher.

This is income, not spending. We might assume that in a large group of American families, total income roughly equals total spending. But, for retirees we might also think there is a general spend-down of assets. If those are non-qualified assets, this extra spending isn't supported by income.

OTOH, a few years ago I looked at the Consumer Expenditures Survey http://www.early-retirement.org/foru...vey-74306.html .That data was for mean spending, and it seems noticeably lower than mean incomes here. I haven’t figured out how to reconcile the two.

I rounded all the numbers to the nearest $100, partially to indicate this type of survey can’t be accurate to the dollar, and partially to make it more readable.

I couldn’t figure out how to use the online tool to give me data on couples where neither spouse works. So I had to download the raw data and do my own calcs for much of the above. That generated an error which I tried to back out as best I could, but I’m sure I lost some accuracy.
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Old 06-04-2017, 11:59 PM   #3
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Quote:
Originally Posted by Independent View Post
A recent thread showed, once again, that this board has a wide range of income and spending levels. Discussions about “what we want/need” often bring up a comment like “The median US household income is something in the low to mid $50k range.”

I know that our retirement income target is based on our desired lifestyle, not on the Jones’s. But, I think it’s fun to look at population statistics just for the dose of reality. (And, because I happen to like data.) So, what is “typical” income for a US retiree?

The mid-50’s above ($56,100 in 2015) combines all households, both workers and retirees, and all size households. 35% of households have only one mouth to feed, 21% have four or more.

That $56,100 comes from the Current Population Survey, which gets lots of data on nearly 70,000 households. Fortunately, the Census Bureau gives us a handy tool for drilling down. https://www.census.gov/cps/data/cpstablecreator.html

I used that. First, I looked at households where the “householder” is 65 or older.
The median income drops to $38,500. That’s quite a bit. Of course, those households are probably smaller.

But, I’m married, so I care about the married couples.
Restricting the data to married couple households, over 65, raises the median all the way to $60,300. Quite a jump.

But, probably too far. “Households” can include children. For older people, those are often adult children living with mom and dad. If those adult children have incomes, they are included in the household income.
Limiting the data to married couples, over 65, with just two persons in the household drops the median down to $56,100. (Look at that, I’m right back where I started.)

But, I’m really interested in retirement income. Some of those couples still have one person w*rking. When I specify the householder is not in the labor force, the median drops to $48,200. And, when I specify that neither is in the labor force, I get $42,200.

That’s the number that’s most like our situation. I can see that we’ve planned for retirement income that is comfortably above the median retired couple.

----

Since I got this far, the next question is “Okay, so where are we on the spectrum”? That led to deciles of income, as follows:

0.90 113,500
0.80 80,600
0.70 63,000
0.60 51,900
0.50 42,200
0.40 35,700
0.30 29,900
0.20 24,700
0.10 18,300

This says that 90% of retired, 65+, couples have incomes below $113,500, 80% are below $80,600, etc.

I can look at this and see that our income is between the .60 and .70, so we’re above median, but not getting into “high” income territory. I think a poll showing the distribution of the couples on this board against that decile grid would be interesting.

And, finally, we’ve all heard that spending drops off with age, what happens to income? Here’s some information on that:

65-69 44,900
70-74 44,000
75-79 41,100
80-84 41,600
85+.. 36,400

Remember, the drop-off is not caused by people dying, because these are all couples.

So, interesting stuff, at least for those of us who like such things.

Here is some more data. My survey pool is a bit smaller than the one you cited. My wifes uncle is over 65, he is broke, so is all his broke friends at the bowling alley. These high rollers get social security lets say (13000 a year), and they get a free phone and food stamps( lets say another 2000 year). they have not filed a tax return in years. Id like to know how they are accounted for. retired early? these guys hardly worked when they were young. Saving for health care? hahah they are all on medicare and medicaid. These winners are more well off than a lot of retirees , so this .10 % bottom group seems suspect to me. They all seem to have spare money for lottery tickets and cigarettes.
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Old 06-05-2017, 04:42 AM   #4
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Good crunching of the data. Interesting.
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Old 06-05-2017, 08:54 AM   #5
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Thanks , interesting data -
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Old 06-05-2017, 09:09 AM   #6
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@ Independent:

Cudos for the effort!

On a more pragmatic note, I fail to see the utility provided by this intellectual masturbation.
What value did it add to your life?
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Old 06-05-2017, 09:12 AM   #7
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Quote:
Originally Posted by joylesshusband View Post
@ Independent:

Cudos for the effort!

On a more pragmatic note, I fail to see the utility provided by this intellectual masturbation.
What value did it add to your life?
My guess is it added about the same value to his life as this post ^ did to yours.
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Old 06-05-2017, 09:13 AM   #8
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Originally Posted by joylesshusband View Post
@ Independent:

Cudos for the effort!

On a more pragmatic note, I fail to see the utility provided by this intellectual masturbation.
What value did it add to your life?
Probably about the same or greater than responding to posts on the internet that you don't really care about.
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Old 06-05-2017, 09:24 AM   #9
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I think this is great. It gets at two important questions. Do I have enough? and Do I need as much as I get older?

Averages (and medians) are useful. While they might not apply to us specifically, they help us understand where we are relative to others. If I cannot retire on the $$ that 1/2 of neighbors are living on, it is always interesting to know why.
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Old 06-05-2017, 09:27 AM   #10
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Quote:
Originally Posted by Independent View Post

And, finally, we’ve all heard that spending drops off with age, what happens to income? Here’s some information on that:

65-69 44,900
70-74 44,000
75-79 41,100
80-84 41,600
85+.. 36,400

Remember, the drop-off is not caused by people dying, because these are all couples.
Thank you, Indy, for this study. I am a "mechanism" person more than a "data" person, so I appreciate it when somebody else is willing to shovel through lots of numbers to reveal the patterns.

Your final chart intrigues me no end because of the notion that individual people constantly move among income percentiles. If any of us currently in our 50s and 60s survives to those later ages we will be filling that declining tail of the distribution. So I wonder about the mechanism creating that late age income drop-off.

Are people encountering nominal decreases in their income between age 70 and 85? Or is the difference merely the corrosive effect on fixed incomes of 15 years of inflation? Or, alternatively, are today's 85-year-olds just people who grew up in an earlier decade with lower average earnings resulting in lower average retirement income?
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Old 06-05-2017, 09:33 AM   #11
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Quote:
Originally Posted by joylesshusband View Post
@ Independent:

Cudos for the effort!

On a more pragmatic note, I fail to see the utility provided by this intellectual masturbation.
What value did it add to your life?
If you are keeping score, I enjoyed the original, thoughtful post a lot more than yours.
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Old 06-05-2017, 09:55 AM   #12
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If you are keeping score, I enjoyed the original, thoughtful post a lot more than yours.
#1

I think I am just nosey. Knowledge is power
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Old 06-05-2017, 10:53 AM   #13
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Originally Posted by joylesshusband View Post
@ Independent:

Cudos for the effort!

On a more pragmatic note, I fail to see the utility provided by this intellectual masturbation.
What value did it add to your life?
About the same value that people get when they look at RBI statistics? Some people like to use numbers to explain stuff they kind of suspect already.

But, stretching for the type of answer you may have been seeking, sometimes I feel like I've missed out on nice things that other people who post here seem to be able to afford. This is a kind of slap-upside-the-head on where I stand.
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Old 06-05-2017, 11:00 AM   #14
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Originally Posted by Independent View Post
...
But, stretching for the type of answer you may have been seeking, sometimes I feel like I've missed out on nice things that other people who post here seem to be able to afford. This is a kind of slap-upside-the-head on where I stand.
I am like this as well. An occasional look at the statistics does wonders if you want to complaint about one's lot in life.

Thanks for the reminder/data!
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Old 06-05-2017, 11:04 AM   #15
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Independent, I enjoyed your number crunching. We live in an area that has become increasingly high cost. Finding the Consumer Expenditure Survey was a real eye opener for us that most people had much lower expenses. Just changing where we shop, dine out and used services like hair salons and car repairs to a different yet close by suburb made an improvement in our finances and ability to ER. Just the grocery price differences alone were huge. Well worth driving an extra 10 - 15 minutes further away from the house once or twice a week. The last major service on one of our cars was $400 less going to an out of town dealer. The local dealer insisted on including a lot more than the factory recommended service and would not do less. And they don't even have good customer rating for quality work on places like Yelp.
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Old 06-05-2017, 12:06 PM   #16
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Originally Posted by Mdlerth View Post
Thank you, Indy, for this study. I am a "mechanism" person more than a "data" person, so I appreciate it when somebody else is willing to shovel through lots of numbers to reveal the patterns.

Your final chart intrigues me no end because of the notion that individual people constantly move among income percentiles. If any of us currently in our 50s and 60s survives to those later ages we will be filling that declining tail of the distribution. So I wonder about the mechanism creating that late age income drop-off.

Are people encountering nominal decreases in their income between age 70 and 85? Or is the difference merely the corrosive effect on fixed incomes of 15 years of inflation? Or, alternatively, are today's 85-year-olds just people who grew up in an earlier decade with lower average earnings resulting in lower average retirement income?
I agree that's an interesting question, even relevant to people who are doing retirement planning. I'd like to sit down with soe 85 year-olds and talk about how their financial retirement went - both on the good side and the bad side. It think it would take that kind of information to get at the question.

My first guess, like yours, is non-COLA'd pensions. I think there's also a little bit of SS rules - initial benefits are indexed to wages, increases after that are indexed to CPI-W. Historically, wages have gone up a little faster, so recent retirees are slightly better off.

In the future, I think we'll see a lot of people spending their 401k/IRA on some decreasing pattern. But, I don't think many of today's older retirees had big qualified accounts.
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Old 06-05-2017, 02:36 PM   #17
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That analysis is more interesting to me than most web articles on similar topics.

Quote:
Originally Posted by Independent View Post
OTOH, a few years ago I looked at the Consumer Expenditures Survey http://www.early-retirement.org/foru...vey-74306.html .That data was for mean spending, and it seems noticeably lower than mean incomes here. I haven’t figured out how to reconcile the two.
I spend way more than I have income to show for it. But I'm "weird" on the income side because I dial-in whatever income number I want by deciding how much Roth vs traditional/401k to pull. A likely even more common situation might be where people dial-in their income by pulling measured traditional/401k and making up the rest with after tax funds.
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Old 06-05-2017, 03:09 PM   #18
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I think the numbers from the 2013 Fed Survey of Consumer Finances chartbook
https://www.federalreserve.gov/econres/scfindex.htm
suggest a significantly lower median retiree income. The table on Page #22 shows median pretax family income as 56.8k for 'employee', 70.8k for 'self-employed', 29.9k for 'retired' and 25.4k for 'other/not working'. No age or family size restriction as far as I can tell. The difference probably involves exactly what is and isn't included, I wonder what that may be.
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Old 06-05-2017, 03:47 PM   #19
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That analysis is more interesting to me than most web articles on similar topics.

I spend way more than I have income to show for it. But I'm "weird" on the income side because I dial-in whatever income number I want by deciding how much Roth vs traditional/401k to pull. A likely even more common situation might be where people dial-in their income by pulling measured traditional/401k and making up the rest with after tax funds.
I believe that for the CPS, withdrawals from Roth IRAs are treated as "income" even though they are not taxable.

OTOH, only dividends and interest from non-qualified plans are counted as income. So any stock sales, maturing bonds or CDs, or principal from a savings account would be missed.
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Old 06-05-2017, 03:47 PM   #20
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About the same value that people get when they look at RBI statistics? Some people like to use numbers to explain stuff they kind of suspect already.

But, stretching for the type of answer you may have been seeking, sometimes I feel like I've missed out on nice things that other people who post here seem to be able to afford. This is a kind of slap-upside-the-head on where I stand.
Thanks for the thoughtful response!

Being a long-term student of the human nature, I always get a kick out of understanding why people do the things they do.
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