A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

Peter J. Brady

Steven Bass

Investment Company Institute*

1401 H Street N.W.

Washington, DC 20005

pbrady@ici.org

Draft: December 10, 2024

Abstract

This paper uses administrative tax data to build a representative sample of the entire US

population in tax year 2016, inclusive of both tax filers and dependents identified on tax returns

and nonfilers identified using information returns. We examine differences in the amount and

composition of income by single year of age and, within each birth-year cohort, by income. The

analysis in this paper complements Brady and Bass (2023a), which used panel data to follow

individuals from age 55 through age 72. Consistent with the panel data analysis, we do not find

a drop in spendable income at the ages normally associated with the transition from work to

retirement. In fact, from age 61 through age 70, we find an increase in both the share of the

population with income and the median amount of spendable income that those individuals

have. We also document the shift with age from relying primarily on labor income to relying

primarily on Social Security and retirement income (income from DB pensions, DC pensions,

and IRAs). Own labor income incidence peaks in the mid-20s, although the share who work or

who have a working spouse remains fairly steady through the mid-40s. As the share with labor

income declines, the share with Social Security and (non-Social-Security) retirement income

increases, but during the transition into retirement the changes by single year of age are not

highly correlated. Some stop working before claiming Social Security while others continue

working after claiming, suggesting that, for many individuals, retirement is a transitional

process rather than a single point in time. After age 70, most individuals rely on a combination

of Social Security benefits and retirement income. Consistent with previous research using tax

data, we find much higher incidence of income from employer plans and IRAs than reported in

household survey data, with 70 percent or more of the population receiving retirement income

directly or through a spouse from age 71 through age 91.

* This research was conducted as part of the Statistics of Income Joint Research Program. Views presented

are those of the authors and do not necessarily represent the views of the Internal Revenue Service or the

views of the Investment Company Institute or its members. We thank Kevin Pierce for his assistance with

this project.

A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

1. Introduction

This study uses administrative tax data to answer two questions about retirement in

America. First, how does spendable income change across the life cycle as individuals move

from working into retirement? Second, how does the composition of income change over the

life cycle as workers move from relying primarily on earnings from labor to relying primarily

on Social Security benefits, retirement plan distributions, and other income? In addition, we

investigate how the answers to these questions differ based on income.

The motivation for trying to answer these questions is that proposals to overhaul the US

Social Security system and the taxation of retirement plans are ubiquitous. We think such

proposals to change the current system should be based on an accurate assessment of how the

current system is performing.

Many proposals are motivated by a belief that the current system provides inadequate

resources to retirees and that the voluntary component of our retirement system—employersponsored defined benefit (DB) and defined contribution (DC) plans and individual retirement

arrangements (IRAs)—is primarily responsible for that failing.1 The belief that the US retirement

system produces inadequate retirement resources is based largely on research projecting that

most Americans will not accumulate enough resources for retirement (see, for example,

Munnell, Chen, and Siliciano 2021; and VanDerhei 2019). The belief that employer plans and

IRAs are not doing enough to help workers prepare for retirement is based largely on analyses

of household survey data that claim too few workers have access to retirement plans (see, for

example, Munnell and Bleckman 2014) and too few retirees receive income from employer

plans (see, for example, Social Security Administration 2016).

There is other research, however, that challenges these beliefs. Both Scholz, Sheshadri, and

Khitatrakun (2006) and Hurd and Rohwedder (2015) conclude that most—though not all—

American households appear to be adequately preparing for retirement. Further, studies that

See, for example, a series of editorials in Bloomberg News in early 2022 (Bloomberg News. America’s Retirement Crisis

Is a Financial Crisis Too, March 28, 2022; Saving for Retirement Is Harder Than It Needs to Be, April 4, 2022;

Piecemeal Reform Won’t Solve the U.S. Retirement Crisis, April 11, 2022; and How to Fix the Broken U.S. RetirementSavings System, April 18, 2022).

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compare tax data to household survey data (Brady and Pierce 2012; Bee and Mitchell 2017;

Brady and Bass 2021; Dushi and Trenkamp 2021; and Bee, et al. 2024) show that household

surveys undercount retirement income—that is, distributions from employer-sponsored DB and

DC retirement plans, IRAs, and annuities. These studies indicate that many more workers

accumulate resources from employer plans and IRAs during their working career and many

more retirees receive income from retirement plans than is indicated in household surveys.

The approach taken to answer these questions is most closely related to Brady, et al. (2017)

and Brady and Bass (2023a), which used panel data to follow individuals through the transition

into retirement. In particular, Brady and Bass (2023a) used administrative tax data to follow

individuals from age 55, before they are eligible to claim Social Security retirement benefits and

when retirement plan distributions are generally subject to an early withdrawal penalty, until

age 72, after the ages at which delaying Social Security claiming no longer increases monthly

benefits and required minimum distributions (RMDs) from IRAs and DC plans begin.

As a complement to Brady and Bass (2023a), this paper analyzes income differences by age

using cross-sectional data. This paper expands the analysis in two ways. First, by looking over

the entire life cycle, we can examine changes in income before age 55 and after age 72. Second,

we utilized a newly available tax form, Form 1095 (which reports coverage by health insurance),

to identify individuals otherwise untouched by the federal tax system, including those whose

only income is from public assistance. 2 This allowed us to better reflect the full population and

more accurately measure the incidence of income. Relative to Brady and Bass (2023a), this

change reduces our income incidence measures, for both total income and its components, but

otherwise the results of the two studies are consistent.

Examining a cross-section of the population by age, we do not find a drop in spendable

income at the ages normally associated with the transition from work to retirement. In fact,

from age 61 through age 70, we find an increase in both the share of the population with income

and the median amount of spendable income that those individuals have.

We wish to acknowledge and thank Ithai Lurie and James Pearce for providing us with the data they processed and

analyzed in Lurie and Pearce (2021). Form 1095 data are complex and require careful processing to be usable. See

Lurie and Pearce (2021) for a description of how they identified individuals with health insurance coverage using

Form 1095.

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More broadly looking over the entire life cycle, spendable income typically follows a

hump-shaped pattern with age. Median spendable income peaks at age 46 and declines by 10

percent of the peak by age 61. After age 70, median spendable income declines by 1.0 percent

per year, on average, through age 90.

The age profile of spendable income is flatter than that of total income because of changes

in effective tax rates over the life cycle. In particular, median total federal tax rates were lower

for retirees than they were for any other adults, with the largest tax rate declines experienced in

the middle of the income distribution.

Throughout their lifetimes, most Americans get most of their income from three sources

ultimately derived from work—labor, Social Security, and (non-Social Security) retirement

income. Among those with income, the typical individual gets 100 percent of their total income

from labor from age 16 through age 54, but has no labor income beginning at age 68.

The data suggest that retirement is better thought of as a period of transition rather than an

event that occurs at a single point in time. For many, the transition from relying primarily on

labor income to relying primarily on retirement and/or Social Security income occurs over a

number of years. Further, when the transition occurs varies by income, with much of the

transition away from labor income occurring prior to age 62 for the lowest income groups.

Most retirees receive both Social Security and retirement income. Consistent with previous

research using tax data, we find much higher incidence of income from employer plans and

IRAs than reported in household survey data, with 70 percent or more of the population

receiving retirement income directly or through a spouse from age 71 through age 91.

Income composition varies considerably across the income distribution, with lower income

retirees typically getting all their income from Social Security and retirement income increasing

in importance as total income increases. Despite being more reliant on Social Security, however,

the spendable income of the lowest income groups falls the least in retirement—relative to both

those in their mid-40s and those aged 61.

The paper is organized as follows. Section 2 describes the data we use in our analysis.

Section 3 examines changes in spendable income by age. Section 4 analyzes changes in the

composition of income by age. Section 5 concludes the analysis.

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2. Description of Data

This study uses US Internal Revenue Service (IRS) administrative tax data from the 2016 tax

year. These data include information from both federal individual income tax returns filed by

taxpayers and information returns issued by third parties and sent to both taxpayers and the

IRS. Information returns are used to report income (such as Form W-2, which reports wages),

expenses (such as Form 1098, which reports mortgage interest expense), and other tax-relevant

information (such as Form 1099-Q, which reports distributions from qualified education savings

plans).3 We also incorporate Social Security Administration (SSA) data on gender, date of birth,

and date of death (if applicable).

Our overall population of interest is US citizens and resident aliens4 who—provided their

gross income exceeded the filing thresholds—would have been required to file a 2016

Form 1040 (inclusive of Form 1040, Form 1040A, and Form 1040EZ), excluding residents of US

territories. 5 This includes US citizens and resident aliens living in a state (inclusive of the 50

states and the District of Columbia), living outside the US, or living overseas as a member of the

US armed forces. We exclude residents of US territories because bona fide residents of US

territories generally do not file a Form 1040 with the IRS.6

Our method for deriving our representative sample from tax data differs from the typical

approach because we sample individuals rather than tax returns. We use the individual as our

unit of observation because the focus of our research—using both cross-sectional data as in this

study and panel data in related studies—is measuring changes in the amount and composition

3

For a full listing of information returns used in this study and their description, see Appendix Table A.1.

Resident aliens include individuals with a green card or who had a “substantial presence” in the US—inclusive of

the 50 US states and the District of Columbia. For more information on US income tax treatment of both resident and

nonresident aliens, see Internal Revenue Service (2017a).

4

For more information on filing requirements, see Internal Revenue Service (2016a) and Internal Revenue Service

(2016b).

5

US citizens and resident aliens who are bona fide residents of Guam, the US Virgin Islands, and the Northern

Mariana Islands are not required to file a Form 1040 with the IRS. US citizens and resident aliens who are bona fide

residents of American Samoa and Puerto Rico are only required to file a Form 1040 if they received income from a

source outside of the territory. For the definition of a bona fide resident and more information on filing requirements

for individuals with income from US possessions, see Internal Revenue Service (2017b).

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of income over the life cycle. It would be difficult, if not impossible, to use any other of unit of

analysis to study differences in income by age.

Another difference with many past studies using tax data is that—following Lurie and

Pearce (2021), and using the data collected and processed by the authors of that study—we

include individuals identified on Form 1095 (inclusive of Forms 1095-A, 1095-B, and 1095-C),

which provides information on health insurance coverage. Studies that use tax data typically do

not include individuals solely dependent on public assistance because the benefit payments are

not reported to the IRS—neither on tax returns nor on information returns. Although our

income measure will not include benefit payments from public assistance programs, our

population counts should include most, if not all, individuals who rely solely on public

assistance because they typically are covered by government provided health insurance.

Our method of estimating the US population from tax data builds on the work of many at

the US Department of the Treasury Office of Tax Analysis (OTA), the Joint Committee on

Taxation (JCT), and the Internal Revenue Service Statistics of Income Division (SOI)—in

particular Cilke (2014) and Lurie and Pearce (2021).7 A more complete description of our

method and the resulting sample is provided in Brady and Bass (2023b).

2.1 Creating the Representative Sample

We create a representative sample of the US population in 2016 by combining three separate

subsamples: one for filers (primary or secondary taxpayers listed on a return), inclusive of both

non-dependent and dependent filers; one for dependent nonfilers; and one for non-dependent

nonfilers. Tax returns allow us to identify filers and the dependents they claim. Information

returns allow us to identify non-dependent nonfilers.

For analysis of annual income, we include in our population only those individuals who

survived through December 31, 2016.

Early work trying to measure the nonfiling population include Cilke (1998), Sailer and Weber (1998), Mortenson et

al. (2009), and Lawrence et al. (2011). Examples of other recent studies using tax data to represent the US population

include Saez (2016) and Larrimore et al. (2019).

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The composition of the 2016 population varies with age (Figure 1). Dependent nonfilers

(individuals identified as a dependent on Form 1040 and who do not file a dependent return)

represent most of the population at younger ages, with their share falling rapidly after age 15,

remaining low through middle age, and then increasing again at older ages. Largely mirroring

the decline in dependent nonfilers, filers (individuals who are primary or secondary taxpayers

on Form 1040) increase rapidly as a share of the population after age 15 and the share remains

high for those from their mid-20s through early 60s before falling off at older ages. Nondependent nonfilers (individuals not identified on a tax return but who receive at least one

information return) increase as a share of the population with age, with their share growth

accelerating after age 60.

As illustrated by their share of the population, the inclusion of nonfilers in the sample is

critical for measuring the income of the elderly. The nonfiler share of the population—inclusive

of both dependent nonfilers and non-dependent nonfilers—increases from 18 percent of

individuals aged 60 to 37 percent of individuals aged 80.

2.2 Marital Status

Individuals are categorized as either joint or non-joint. For individuals who file a return,

married individuals filing a joint return are categorized as joint and all other filers (single, head

of household, qualified widow[er], and married filing separately) are categorized as non-joint.

We do not attempt to impute marital status for nonfilers, so all dependent nonfilers and nondependent nonfilers are categorized as non-joint.

The joint share of the population in 2016 follows a hump-shaped pattern by age (Figure 2).

The joint population share increases rapidly after age 18, hitting one-quarter of the population

at age 27 and half of the population at age 37 before peaking at 56 percent at age 62. After age

62, the joint population share falls—at first slowly and then at an accelerated rate. In addition to

spousal death, a portion of the decline in the joint population share after age 62 may be

attributable to a falling share of the population filing a return. Among filers, the share filing a

joint return peaks at age 69, where it reaches 71 percent.

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2.3 Income and Tax Measures

We derive our total income measure from tax data, but it differs from the tax code’s

definition of income because we are primarily focused on measuring income available to spend

after paying taxes and saving for retirement. As such, we include some types of income

excluded from taxable income—such as tax-exempt interest and the nontaxable portion of Social

Security benefits. To the extent possible, we exclude from income all retirement plan

contributions and include in income all non-rollover retirement plan distributions—regardless

of whether contributions were from an employer or an employee, and regardless of their tax

treatment.8 This means we exclude from income not only tax-deferred employee contributions

to employer plans and IRAs, but also Roth contributions and non-Roth after-tax contributions.

It also means we include in income not only taxable non-Roth distributions, but also Roth

distributions and the portion of non-Roth distributions that represents basis. Finally, because

our spendable income measure does not account for state income taxes, we exclude from

income taxable state income tax refunds.

The income and taxes of filers are primarily derived from tax returns while the income and

taxes of nonfilers are derived solely from information returns. Table A.2 describes in detail how

we calculate our income and tax measures for both filers and nonfilers.

Note that we do not impute taxes. For filers, income taxes are based on the tax amounts

reported on Form 1040, and payroll taxes are based on both the amounts reported as withheld

on Form W-2 and amounts reported on Form 1040 (for self-employment taxes, taxes on

unreported tips, and uncollected payroll tax on wages). For nonfilers, both income and payroll

taxes are based on the amounts reported as withheld on information returns.

Our measure of total income is the sum of six types of income: labor (wage and salary, selfemployment earnings, unemployment compensation), Social Security (disability benefits and

retirement benefits), retirement (IRA distributions and income from pensions and annuities),9

investment (taxable interest, tax-exempt interest, dividends, gains/losses),

business/farm/rents/royalties (business and farm income in excess of self-employment

8

See Brady and Bass (2020b) for a description of how we identify rollover distributions.

9

Pension income includes income from both DB and DC pensions .

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earnings; income from rents, royalties, partnerships, S-corps, and trusts), and other (net

alimony [alimony received less alimony paid] and other income).10

Our measure of total income already accounts for all the savings we can identify using tax

data. Neither employer nor employee contributions to pensions are included in our measure of

total income.

As such, our measure of spendable income is calculated as total income less total federal

taxes. Total federal taxes are comprised of federal income taxes and the employee share of

payroll taxes. For filers, federal income taxes are taken from Form 1040 and payroll taxes are

based on a combination of amounts withheld on information returns and Form 1040. For

nonfilers, both federal income and payroll taxes are based on the amount withheld on

information returns. We do not attempt to estimate state and local taxes. We also do not impute

federal excise or corporate income tax burdens.

The primary measure of income we use to analyze the incidence and amount of income, in

total and by type, is per capita income, which allocates the joint income of married couples

equally to each spouse. For a primary or secondary taxpayer on a joint return, per capita income

is the income derived from the tax return divided by two. For a primary taxpayer on a non-joint

tax return, per capita income is simply the income derived from the tax return. Similarly, for

nonfilers (who are all assumed to be non-joint), per capita income is simply the income derived

from the individual’s information returns.

In addition to per capita income, we also report own income for labor, Social Security, and

retirement income. For individuals with joint marital status, we use information returns to

allocate income to the spouse who received the income. For individuals with a non-joint marital

status (inclusive of filers with a non-joint return and all non-filers), there is no difference

between own income and per capita income.

Importantly, neither per capita income nor own income adjusts for family or household

size. All income reported on a tax return is allocated to filers—the primary taxpayer in the case

Our income measure does not include public assistance income because benefit payments from such programs as

Temporary Assistance to Needy Families (TANF), Supplemental Security Income (SSI), and Veteran Affairs (VA) are

not reported to the IRS—neither on tax returns nor on information returns.

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of non-joint returns and the primary and secondary taxpayers in the case of joint returns. The

number of dependents claimed on a tax return has no impact on either measure, as no filer

income is allocated to dependents. Dependents have income only if they file their own return or

have income reported on their own information returns.

2.4 Tax Rates

For individuals who have income, we calculate average effective tax rates. We categorize

individuals as having income if they have nonzero per capita total income in any of our six

broad income categories (labor, Social Security, retirement, investment,

business/farm/rents/royalties, and other) or in any of the components of investment income

(taxable interest, tax-exempt interest, dividends, and gains/losses). An individual’s average

effective tax rate is calculated as taxes paid divided by total income, with both taxes and income

measured on a per capita basis. Average effective tax rates are reported for federal income

taxes, payroll taxes, and total federal taxes.

2.5 Medians and Percentile Measures

The medians presented in this study are approximate, as true medians could represent

disclosure of an individual’s tax data. To calculate approximate medians, we average the 48th,

49th, 50th, 51st, and 52nd percentile values and then round that average (to the nearest dollar

for amounts less than $100, the nearest $10 for amounts from $100 to less than $10,000, the

nearest $100 for amounts of $10,000 or more, and two decimal places for percentages). We then

only report these approximate medians for groups with 100 or more observations. We use the

same method to report other percentile measures.

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3. Changes in Spendable Income over the Life Cycle

In this section, we examine differences in 2016 income by age. Differences reflect both agerelated differences (that is, changes in income that individuals typically experience with age)

and cohort differences (that is, differences caused by the unique historical experience of each

birth-year cohort).

We also examine changes in income by age controlling for income rank within each age

cohort. This can provide some insights into income dynamics across the income distribution

provided the income ranking of individuals within their age group is somewhat stable over

time.

Some caution is warranted when interpreting the cross-sectional results as representing the

typical life cycle experience. That said, we are encouraged that the results for those aged 55

through 72 are consistent with those of Brady and Bass (2023), which analyzed panel data, and

we believe examining the full 2016 cross-section provides additional insights into income

dynamics both before and after the transition into retirement.

Although we report changes in total income, we are primarily focused on changes in

spendable income—that is, income available to spend after paying taxes and saving for

retirement. Economic theory predicts that individuals generally attempt to maintain steady

consumption over the life cycle.11 We cannot measure consumption or spending with the tax

data, but we can measure income available to spend.

Optimization over the life cycle generally requires that the marginal utility of consumption be equal in each time

period. If certain other conditions are met, this would also imply that an individual would prefer to smooth

consumption over time. See Engen, Gale, and Uccello (2005) and Scholz, Seshadri, and Khitatrakun (2006) for a

more formal description of life-cycle models and for a discussion of retirement savings adequacy. To the extent that

some spending—such as a portion of spending on clothing and travel—are properly characterized as a cost of

working rather than consumption, and to the extent retirees substitute home production for market production —for

example, preparing lunch at home versus purchasing lunch at a fast food establishment or cafeteria, consumption

can be maintained even if spending declines at older ages. See Hurst (2008) for a discussion of consumption changes

in retirement. In addition, retired people may maintain their marginal utility by diminishing their consumption and

increasing their time devoted to leisure. At younger ages, life-cycle models typically predict that workers will take

on debt because, to the extent earnings typically increase early in a worker’s career, they may be able to finance

consumption in every year of their life that is higher than what they earn early in their career. One reason younger

workers may not borrow is that they lack access to credit (see Deaton 1991 for a discussion of liquidity constraints

and their effect on life-cycle models). Another reason is that, although workers can expect earnings to increase, on

average, future earnings are too uncertain for them to want to risk taking on debt (see Carroll 1997 for a discussion

of “buffer-stock” savings and its effect on life-cycle models).

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To calculate spendable income, we subtract total federal taxes (payroll taxes plus individual

income taxes) from total income. Our measure of total income already adjusts for retirement

savings—it excludes all contributions to qualified retirement plans (inclusive of both taxdeferred and taxable contributions) and includes all non-rollover distributions from qualified

plans (inclusive of both taxable and non-taxable distributions).

We find that spendable income varies less over the life cycle than does total income because

of the impact of taxes. Total federal taxes are a function of both the amount and the composition

of income. Spendable income typically increases by less than total income early in life, as

effective income tax rates generally increase with total income. Later in life, spendable income

typically decreases by less than total income as effective tax rates fall. Payroll tax rates fall as the

share of total income derived from labor declines. Income tax rates fall both because total

income is lower and because only a portion of Social Security benefits are included in taxable

income.

The extent to which taxes vary over the life cycle differs based on where individuals fall in

the income distribution. Controlling for income rank within each age cohort, the sharpest drops

in tax rates during the transition into retirement are experienced by those in the middle of the

income distribution.

Encompassing both differences in total income and differences in taxes, the age profile of

median spendable income is flatter for lower income groups. The highest income groups

experience the largest declines in spendable income during the transition into retirement.

Median spendable income actually increases for the bottom 60 percent of the income

distribution between age 61 and age 70.

3.1 Incidence and Amounts of Income by Age

The share of the 2016 population with income remains consistently high throughout

adulthood, and even increases slightly for those older than age 61 (Figure 3).12 The share of the

Individuals are categorized as having income if they have nonzero per capita income in any of our six broad

income categories (labor, Social Security, retirement, investment, business/farm/rents/royalties, and other) or in any of the

components of investment income (taxable interest, tax-exempt interest, dividends, and gains/losses). For the

derivation of these income measures, see Table A.2.

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population with income—inclusive of both filers and nonfilers with income—was very low for

young children but increases rapidly for teenagers and young adults, hitting 93 percent by

age 26. The share generally remains steady for those older than age 26, albeit increasing slightly

for those older than age 61. On average, 94 percent of the population had income—either

directly or through a spouse—from age 27 through age 61, and 96 percent of the population had

income from age 62 through age 90.

Conditional on having income, median per capita total income follows a hump-shaped

pattern with age in 2016 (Figure 4, blue line). Children 15 or younger with income typically

have small amounts, with median total income ranging from $50 for those younger than one

year of age to $1,200 at age 15.13 Median total income increases rapidly early in adulthood to

$30,000 at age 30 and then continues to increase with age but at a slower rate, peaking at $41,000

at age 46. Income declines with age for individuals older than 46—to $37,000 at age 61 and

$34,000 at age 70.14 After age 70, median total income falls by about 1.1 percent per year of age,

on average, through the late-90s.15

The age profile of median spendable income in 2016 (Figure 4, orange line) is flatter than

that of total income—particularly between age 61 and age 70—because of changes in taxes paid

over the life cycle. Prior to age 46, the growth in taxes paid results in spendable income

increasing less with age than total income. From age 46 to age 61, both total and spendable

median income falls roughly proportionately, with both declining by about 10 percent. The

largest difference in the two series was between age 61 and age 70, with median spendable

income $500 higher at age 70 ($32,800 versus $32,300 at age 61) despite median total income

being $2,900 lower ($34,300 versus $37,200 at age 61). After age 70, median spendable income

For ease of exposition, dollar amounts reported in the text are generally rounded to two significant digits. The

values plotted in the figures are available in an accompanying Excel spreadsheet.

13

Unlike the decline from age 46 to age 61, the decline in median per capita total income between age 61 and age 70

was associated with increased incidence. The share of the population with income increased 3.3 percentage points

between age 61 and age 70, from 93.7 percent to 97.0 percent.

14

Median total income declines 2.0 percent per year of age, on average, from age 70 through age 80, and 0.7 percent

per year of age, on average, from age 70 through age 98. Over the entire period from age 70 through age 98, median

spendable income falls by 1.1 percent per year of age, on average.

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declines a bit more slowly than total income, falling by about 1.0 percent per year of age, on

average, through the late-90s.16

3.2 Changes in Federal Taxes Over the Life Cycle

Median total federal taxes in 2016—the sum of payroll and income taxes—increases rapidly

through age 46 and remains high before beginning to edge down for individuals older than age

55 and then falling rapidly after age 61 (Figure 4, green line). As with income, median taxes

increase with age through age 46, but then taxes remain high even at ages where median total

income begins to decline, peaking for individuals in their early 50s. After age 61, taxes begin to

decline rapidly, and by age 84 more than half of individuals with income paid no federal tax—

neither payroll tax nor income tax.

As a share of total income, total federal taxes are lower for retirees than they were for any

other adults (Figure 5, top panel). From individuals in their late 20s to those in their early 60s,

the combination of payroll and income tax typically exceeds 12.0 percent of total income, with

median total federal tax rates peaking above 15.0 percent at age 55. For those older than age 60,

median total tax rates fall quickly over the ages individuals typically transition into retirement,

falling below 5.0 percent by age 68 and below 2.0 percent by age 74.

Payroll tax rates vary little with age for the typical individual in their prime working ages

but decline rapidly over the ages individuals typically transition into retirement (Figure 5,

middle panel). Median payroll tax rates are close to 7.65 percent from age 16 through age 55,

with the typical individual getting nearly all their income from labor. For individuals older than

age 55, median payroll tax rates edge down before falling rapidly for individuals older than age

61, as an increasing share of income is derived from sources—such as Social Security benefits

and retirement plan distributions—not subject to payroll taxes. By age 68, more than half of

individuals with income pay no payroll tax—either directly or through a spouse.

Median spendable income declines 1.8 percent per year of age, on average, from age 70 through age 80, and 0.6

percent per year of age, on average, from age 70 through age 98. Over the entire period from age 70 through age 98,

median spendable income falls by 1.0 percent per year of age, on average.

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In contrast to payroll tax rates, income tax rates vary more with age and peak much closer

to retirement (Figure 5, bottom panel). By single year of age, more than half of individuals with

income pay no income tax until age 19. The median income tax rate increases to nearly 5.0

percent for individuals aged 29 and remains about the same through age 37. For those older

than age 37, median income tax rates again increase with age and continue to increase even

after age 46, peaking above 7.8 percent from age 53 through age 61 despite declining median

income. For individuals older than age 61, median income tax rates decline sharply with age. By

age 81, more than half of individuals with income pay no federal income tax.

Family dynamics affect the income tax rates of younger individuals. Presumably, income

tax rates plateau from age 29 through age 37—despite total income increasing—because of

individuals purchasing homes and starting families at those ages, both of which typically

reduce income taxes for any given level of total income.17, 18 Conversely, income tax rates

continue to increase with age after age 46—despite total income decreasing—presumably

because of children getting older and eventually leaving the household and mortgage interest

expense declining as share of total income.19

Income tax rates fall late in life because of changes in both the amount and the composition

of income.20 Income tax rates typically decline at older ages because (1) total income generally

declines with age, and (2) only a portion of Social Security benefits are included in taxable

17

Filers who itemize can deduct their property taxes and mortgage interest expense.

In 2016, there were four tax provisions that provided tax benefits to filers with dependent children. A personal

exemption was allowed for qualifying dependents who were younger than 19 years of age or who were full-time

students younger than 24 years of age or who were permanently and totally disabled regardless of age (see Internal

Revenue Service 2016b). A non-refundable Child and Dependent Care Credit was available to offset work-related

care expenses for a dependent child younger than 13 years of age or for a disabled child or spouse (see Internal

Revenue Service 2016c). A partially refundable Child Credit was available for dependent children younger than

17 years of age (see Internal Revenue Service 2016d). A fully refundable Earned Income Credit (EIC) was available to

lower income filers but was considerably more valuable for filers with dependents (see Internal Revenue Service

2016e).

18

For the ages at which tax credits and exclusions for dependent children end, see note 18. With traditional fixed-rate

self-amortizing mortgages, mortgage interest expenses typically decline with age as the portion of the monthly

payments that represent mortgage interest declines over time. In addition, monthly payments are fixed in nominal

dollars with such mortgages and, thus, likely decline as a percentage of income over time.

19

20

For a more detailed discussion of why income taxes typically decline in retirement, see Brady (2016).

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income.21 In combination, these two changes reduce the share of total income subject to income

tax and reduce the share of taxable income subject to higher marginal tax rates.

3.3 Income and Taxes Controlling for Income Rank within Age Group

To examine how changes in income differ by the amount of total income individuals have,

we rank individuals by income within their single-year birth cohort. We then split those with

positive total income into ventiles (20 equally sized groups), with ventile 1 having the lowest

income and ventile 20 having the highest income. Those with non-positive total income,

representing 0.7 percent of those with income in 2016, are included in our income tabulations

for the entire sample but are not reported separately in the ventile tabulations.22

Examining changes in income by age controlling for income rank can provide some insights

into income dynamics provided the income ranking of individuals within their age group is

somewhat stable over time.

That said, some caution is warranted in interpreting the results. One reason is that income

rank is endogenous—that is, how an individual’s income changes with age will impact the

ventile into which they are categorized. Another reason is the composition of the population

with income changes with age, which can affect an individual’s rank even if they do not

experience large relative changes in income.

Two issues may be of particular importance at older ages that may have (at least partially)

offsetting effects. First, those with higher income are more likely to survive from year to year.

All else equal, this would shift some individuals into lower income ventiles with age. Second,

there is an increase in the share of the population with income after age 61. All else equal, and

The percentage of Social Security benefit payments included in gross income is based on a taxpayer’s modified

adjusted gross income (MAGI), which includes half of Social Security benefit payments plus other income included

in gross income. For single, head of household, and qualifying widow(er) returns: if MAGI is $25,000 or less, no

Social Security benefit payments are included in gross income; if MAGI is between $25,000 and $34,000, the lesser of

50 percent of Social Security benefit payments or 50 percent of MAGI in excess of $25,000 is included in gross income;

if MAGI is in excess of $34,000, the lesser of 85 percent of Social Security benefit payments or 85 percent of MAGI in

excess of $34,000 plus $4,500 [=50%*($34,000-$25,000)] is included in gross income. For joint returns, the MAGI

thresholds are $32,000 and $44,000, respectively. These thresholds are not indexed for inflation. For more information

on the taxation of Social Security benefits, see Internal Revenue Service (2017c).

21

22

See note 12 for an explanation of how we categorize individuals as having income.

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assuming those who had no income when aged 61 or younger also typically have relatively low

income when they are older than 61, this would tend to shift some individuals into higher

income ventiles with age.

3.3.1 Total Income by Ventile

Controlling for income rank within each single-year birth cohort, median total income is

typically hump shaped over the life cycle, with declines at older ages generally larger for higher

income ventiles (Figure 6).

Focusing on the top 15 ventiles (the highest 75 percent of the income distribution), higher

income ventiles generally experience larger declines after the age at which peak income is

reached, particularly from age 61 through age 70. For all 15 ventiles, total income increases

rapidly with age through the mid-40s, with income growing relatively more quickly for the

lower income ventiles before age 30 and then growing relatively more quickly for the higher

income ventiles after age 30. From peak income through age 61, all 15 ventiles experience

similar drops in median total income, with declines ranging from 8 percent to 10 percent. From

age 61 to age 70, however, higher income ventiles experience sharper drops in median total

income, ranging from no change for ventile 6 up to a 17 percent decline for ventile 20. After

age 70, declines with age are a bit more rapid in the middle of the income distribution.

The age patterns differ somewhat for the bottom five ventiles (the lowest 25 percent of the

income distribution), with age 70 income higher than age 46 income for the bottom three

ventiles and higher than age 61 income for all five ventiles. After age 70, median total income

remains higher than age 61 income for the bottom two ventiles and is either flat or declines

modestly for ventiles 3 through 5.

3.3.2 Federal Tax Rates by Ventile

Combining both income and payroll taxes, the middle-income ventiles have the sharpest

percentage point declines in federal total tax rates during the transition into retirement

(Figures 7a and 7b).

Relative to the middle-income ventiles, taxes fall less sharply for the lowest income ventiles

despite paying little or no taxes in retirement because they paid little or no taxes—or even

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received a net refund—prior to retirement. For example, while the typical individual in ventile 4

of their age group pays no federal taxes at ages 62 or higher, median total tax rates are negative

from age 27 through age 45 and are 2.0 percent or lower from age 46 through age 61.

Relative to the middle-income ventiles, total tax rates fall relatively less sharply for the

highest income ventiles both because income tax rates decline more gradually with age and

because payroll taxes represent a smaller share of their total income prior to retirement. For

example, median total tax rates for ventile 10 fall from a peak of 16 percent (from age 54

through age 57) to 3 percent by age 70, a drop of 13 percentage points. By comparison, median

total tax rates for ventile 20 fall from a peak of 28 percent (from age 42 through age 56) to 21

percent by age 70, a drop of 7 percentage points. Even though tax rates continue to decline with

age for the higher income ventiles after age 70, they do not match the percentage point declines

of the middle-income ventiles until after age 90.

Across income groups, median payroll taxes typically remain near 7.65 percent during

working years before declining rapidly as workers transition into retirement (Figure 7c).23 One

exception to that rule is that payroll taxes represent more than 7.65 percent of total income at

certain ages for the typical individuals in the top 11 income ventiles (ventiles 10 through 20),

presumably because employee retirement contributions are subject to payroll tax but are not

included in our measure of total income. Another exception is that median payroll tax rates fall

well below 7.65 percent at younger ages for the top 5 income ventiles (ventiles 16 through 20),

both because a worker’s labor earnings above $118,500 were not subject to the 6.2 percent Social

Security payroll tax in 2016 and because, with age, more of total income for these income

groups comes from sources not generally subject to payroll tax—such as interest, dividends,

and capital gains.

At older ages, the higher income ventiles are more likely to be subject to payroll taxes.

Median payroll taxes are zero for the bottom three ventiles (ventiles 1 through 3) by age 62, for

Although we do not plot data prior to age 20, the middle-income ventiles are more likely to be subject to payroll

taxes at younger ages. Children younger than 15 typically pay no payroll tax, regardless of income, with the highest

income ventiles typically getting their income from Social Security benefits and the lowest income ventiles getting de

minimis amounts from interest, dividends, and other income not subject to payroll tax. Median payroll tax rates are

positive for the middle income ventiles starting at age 15 and are positive for all ventiles by age 19.

23

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the two middle ventiles (ventiles 10 and 11) by age 68, and for the top ventile (ventile 20) by

age 75.

Median income tax rates follow considerably different patterns by age when controlling for

individuals’ income rank within their age group (Figure 7d). For the top two income ventiles

(ventiles 19 and 20), median income tax rates peak at age 48—the same age at which median

total income peaks. The tax benefits of children and, for filers who itemize, home ownership can

be seen more clearly in the age profile of the other income ventiles, as median income tax rates

plateau or decline in the late-20s or early-30s despite median total income generally increasing,

and then continue to increase even after median total income peaks.

Median income taxes for the seven lowest income ventiles (ventiles 1 through 7) are

negative—that is, taxpayers get refunds in excess of income taxes paid—beginning at age 25.

Median income taxes are negative for the lowest seven ventiles through age 40, for the lowest

four ventiles through age 50, and for ventile 2 through age 57. Net refunds are highest—both as

a percentage of total income and in absolute dollars—for ventile 4, peaking at 20 percent of

income, or $2,940 per capita, at age 35. Median income taxes are never positive for the lowest

four ventiles and remain low for ventiles 5 through 7, with ventile 7 peaking at 5.7 percent of

income at age 55. Median income taxes fall quickly after age 60 for ventiles 5, 6, and 7—falling

to zero by age 62, 64, and 66, respectively.

Median income tax rates are never negative for the next nine income ventiles nearer the

middle of the income distribution (ventiles 8 through 16), but they do decline beginning in the

mid- to late-20s before increasing again and peaking at age 55 or older. Peak median income tax

rates from the middle income ventiles range from 7.2 percent at age 55 for ventile 8 to

13 percent at age 60 for ventile 16. After age 60, median income tax rates decline sharply

through age 68 and then more slowly thereafter.

Median income taxes for the four highest income ventiles (ventiles 17 through 20) follow

more of a hump-shaped pattern with age, increasing with age initially and then declining. Peak

median income tax rates range from 14 percent at age 60 for ventile 17 to 24 percent at age 48 for

ventile 20. After age 60, median income tax rates typically decline more slowly than they do for

the middle-income ventiles.

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3.3.3 Spendable Income by Ventile

The impact of taxes varies considerably across income ventiles, but the end result is that

median spendable income generally has a flatter age profile than median total income

(Figure 8). The lone exception is ventile 1, for whom there is little difference between total and

spendable income at any age. For the lowest income ventiles, the primary impact of the federal

tax system is that spendable income exceeds total income at younger ages when they benefit

from child-related refundable credits. For the rest of the population, federal taxes generally

cause spendable income to increase more slowly than total income at younger ages and decline

more slowly as they transition into retirement.

Encompassing both differences in total income and differences in taxes, the age profile of

median spendable income is flatter for lower income ventiles. Lower income ventiles are closer

to their peak spendable income in their 30s, with median spendable income at age 35

representing 95 percent of the peak for ventile 5, 85 percent for ventile 15, and 67 percent for

ventile 20. After peaking, spendable income declines for all but the lowest income ventile

through age 61, but then increases for the bottom 12 ventiles between age 61 and age 70. In

contrast, median spendable income declines by 11 percent for the top ventile over those same

ages. Relative to peak spendable income, higher income ventiles experience larger declines in

median spendable income from their peak to age 70. This remains true until after age 80, at

which point median spendable income continues to decline slowly with age near the middle of

the income distribution but declines more slowly—or even increases—for the bottom and top of

the income distribution.

3.4 Summary of Changes in Spendable Income over the Life Cycle

Examining a cross-section of the population by age, we do not find a drop in spendable

income at the ages normally associated with the transition from work to retirement. In fact,

from age 61 through age 70, we find an increase in both the share of the population with income

and the median amount of spendable income that those individuals have. Controlling for

income rank within each age cohort, the highest income ventiles experience the largest declines

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in spendable income over these ages, with median spendable income actually increasing for the

bottom 12 income ventiles.

More broadly looking over the entire life cycle, most adults have income with the median

amount of spendable income typically hump shaped over the life cycle. The share of the

population with income was 94 percent, on average, from age 27 through age 61, and was 96

percent, on average, from age 62 through age 90. Among those with income, median spendable

income peaks at age 46 and falls by 10 percent of the peak by age 61. Despite the increase in the

share of the population with income, median spendable income remains roughly flat from

age 61 through age 70. On average from age 70 through age 90, median spendable income

declines by 1.0 percent per year.

The age profile of spendable income is flatter than that of total income because of changes

in effective tax rates over the life cycle. In particular, median total federal tax rates were lower

for retirees than they were for any other adults. Controlling for income rank within each age

cohort, tax rates decline the most immediately after age 61 for those in the middle of the income

distribution.

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4. Changes in the Composition of Income over the Life Cycle

Throughout their lifetimes, most Americans get most of their income from three sources—

labor income (wages, self-employment earnings, and unemployment compensation), Social

Security income (disability, retirement, and survivor benefits), and retirement income (IRA

distributions and pension and annuity income). All three of these income sources are ultimately

derived from work—either as current compensation (labor income), deferred compensation

(retirement income), or government benefits based on a worker’s earnings history (Social

Security income). The only groups that typically get more than a de minimis amount from other

sources are older individuals in the highest income ventiles.

Broadly over the life cycle, there is a decline in the importance of labor income with age

and an increase in the importance of Social Security and retirement income. From age 16

through age 55, the typical individual derives 100 percent of their income from labor. By age 68,

the typical individual derives none of their income from labor.

The data suggest, however, that the transition from work to retirement typically does not

occur at a single point in time. The data also show that the relative importance of Social Security

benefits and retirement plan distributions varies considerably across the income distribution.

As with previous work using tax data, we find that retirement income is much more

prevalent than reported in household survey data. Consistent with the findings of Brady and

Bass (2023a)—which followed individuals from age 55 through age 72 using panel data—we

find that more than 70 percent of individuals receive retirement income at age 72, either directly

or through a spouse. The cross-section data we analyze here further shows that age 72 is not an

outlier: own or spouse retirement income incidence is 70 percent or higher from age 71 through

age 91.

4.1 Income Sources and Amounts by Age

For analysis, we separate income into two broad categories. The first category includes

labor, Social Security, and retirement income—which, for brevity and clarity, we refer to as

Labor+SS+Retire income. The second category includes all other sources of income (including

taxable interest, tax-exempt interest, dividends, gains/losses, rents, royalties and income from

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partnerships and S-corporations)—which, for brevity, we refer to as non-Labor+SS+Retire

income.24

Few children aged 13 or younger have any income and those who do typically have small

amounts (Figure 9). Median total income ranges from $50 for the 1.1 percent of children

younger than one year of age who have income to $900 for the 13 percent of children aged 13

who have income. Initially most children get all their income from non-Labor+SS+Retire

income—primarily de minimis amounts of interest and dividends. Although the median

amount of non-Labor+SS+Retire income changes little with age for children, the share of

children with Labor+SS+Retire income—primarily Social Security benefits—increases, pulling

up the median amount of total income.

Beginning at age 14, the share of the population with Labor+SS+Retire income follows a

similar age profile as the share with total income. The share of the population with

Labor+SS+Retire income increases rapidly, hitting 90 percent at age 26 and remaining around

that level through age 61 (figure 9, top panel). After age 61, the share increases again, averaging

96 percent from age 65 through age 90.

Beginning at age 18, per capita median Labor+SS+Retire income follows a hump-shaped

pattern with age similar to that of median total income (Figure 9, bottom panel).

The incidence of non-Labor+SS+Retire income increases with age, with at least half of the

population having the income beginning at age 42, but the income amounts are typically low.

Conditional on having the income, median non-Labor+SS+Retire income declines with age after

the early 20s as the incidence of the income increases, and then, around age 40, it begins to

increase with age. That said, the median amounts were $250 or less through age 61. After

age 61, the median amount continues to increase, hitting $500 at age 72 and $1,000 at age 82.

From age 18 through age 61, 3.5 percent of the population, on average, has only

non-Labor+SS+Retire income. That share falls to less than 0.5 percent from age 70 through

age 94.

When choosing our shorthand for these broad income categories, we admittedly prioritized clarity over eloquence.

This is because our previous attempts to create an eloquent shorthand for Labor+SS+Retire income (such as “workrelated income” and “income derived from work”) caused considerable confusion among readers.

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The remainder of this discussion will focus on income from labor, Social Security, and

retirement. More detailed information on non-Labor+SS+Retire income is available in a

supplemental appendix.

4.1.1 Labor Income

Incidence of own labor income peaks in the mid-20s then declines slowly with age before

dropping more rapidly as individuals transition into retirement (Figure 10, top left panel, dark

orange line). Own labor incidence increases rapidly after age 15, peaking at 86 percent from

age 23 through age 27. The share of the population working then declines with age—at first

slowly and then accelerating beginning in the late 40s. The sharpest declines in work occur in

the 60s and early 70s, with own labor income incidence falling from 63 percent at age 61 to

17 percent at age 75.

Compared with own incidence, own or spouse labor income incidence peaks later, remains

steadier through middle age, and then declines more slowly with age until later in life (Figure

10, top left panel, light orange line). This is because the share of the population who only receive

labor income through a spouse increases with age, peaking above 13 percent from age 65

through age 67. As a result, own or spouse labor incidence peaks at 90 percent from age 27

through age 37 and remains above 88 percent through age 46. As with own incidence, own or

spouse labor income incidence declines sharply in the 60s and early 70s, falling from 75 percent

at age 61 to 25 percent at age 75.

For those with the income, the median amount increases rapidly from the mid-teens

through the late-30s, remains fairly steady through the late 50s, and then begins to decline at an

accelerating rate (Figure 10, top right panel, dark orange line). Median own labor income is

$40,000 or higher from age 40 through age 58, with peak earnings of $42,500 at age 46. As own

labor incidence declines at older ages, the median income of those who continue to work also

falls, from just over $37,000 at age 61 to $11,000 at age 75. Median per capita labor income

follows a similar path as own income through age 46 but then declines more rapidly through

age 61, as the share of married individuals with only spousal labor income increases (Figure 10,

top right panel, light orange line).

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4.1.2 Social Security Income

Own incidence of Social Security income follows different patterns for three different

groups: children, disabled adults, and retirees (Figure 10, middle left panel, dark green line).25

Among children, own Social Security incidence peaks at 10 percent of the population at

age 18. Children generally receive benefits if they have a parent who either receives Social

Security benefits or is deceased. To receive benefits, children need to be either (a) younger than

age 18, (b) younger than age 19 and still attending primary or secondary school, or (c) any age

with a disability that began before age 22.26 The share of children receiving benefits increases

with age to 10 percent at age 18 and then declines rapidly, hitting 0.6 percent at age 21. Children

with Social Security are about evenly split between those receiving disability benefits and those

receiving retirement or survivor benefits.27

In the early-20s, the share of the population directly receiving Social Security benefits

begins to grow again with age, albeit slowly, hitting 12 percent at age 59. Nearly all the growth

in own Social Security incidence over these ages represents individuals receiving disability

benefits. At age 59, 93 percent of Social Security beneficiaries receive disability payments.

After age 59, growth in own Social Security income incidence accelerates—first at age 60,

when individuals with a deceased spouse can generally first claim survivor benefits, and again

at age 62, the early claiming age for retirement benefits.28 At age 72, 94 percent of the population

receives their own Social Security income. By single year of age, the largest percentage point

increases in own incidence occur at age 62 (when it increases from 15 percent to 33 percent) and

the full benefit retirement age of 66 (when it increases from 60 percent to 81 percent).29

In this paper, own Social Security income refers to any benefits sent directly to an individual and which would be

reported as being sent to the individual on Form SSA-1099. These would include an individual’s own benefits—that

is, disability and retirement benefits to which the individual is entitled based on their own work history. It would

also include benefits paid to children or spouses (including survivors) based on the work history of a parent or

spouse.

25

26

For a more detailed discussion of benefit eligibility for children, see https://www.ssa.gov/pubs/EN-05-10085.pdf.

The tax data allow us to identify disability benefits but do not allow us to distinguish between retirement and

survivor benefits.

27

28

Disabled widows/widowers and those with a child younger than age 16 can claim survivor benefits before age 60.

Age 66 was the full benefit retirement age for individuals born from 1943 through 1954 (age 73 through age 62 in

2016). The full benefit retirement age increases ratably to age 67 for those born in 1960 or later (aged 56 or younger in

2016).

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When looking more broadly at the share of the population who received Social Security

either directly or through a spouse, we see a similar pattern of incidence by age except during

middle age (Figure 10, middle left panel, light green line). Through age 43, less than 1.0 percent

of the population did not receive Social Security benefits but had a spouse who did—either

because the spouse received disability benefits or because the spouse was older and had already

claimed retirement benefits. After age 43, spousal only Social Security income incidence

increases with age, peaking at 12 percent of the population at age 61. This share then declines

with age as the share of married individuals with their own Social Security benefits increases.

After age 70, less than 1.0 percent of the population receives Social Security income only

indirectly through a spouse.

For those receiving Social Security benefits, median Social Security income generally

increases with age, with median own income peaking just below $17,000 and median per capita

income peaking just above $16,000 from age 70 through age 76 (Figure 10, middle right panel).

Median own Social Security income is substantially lower at ages when incidence either drops

rapidly (age 19 through age 21) or increases rapidly (age 62 through age 66), as at those ages

many of the individuals exiting or entering the benefit rolls would have received less than a full

year of benefits. This effect is less notable for median per capita income during the 60s because

some individuals claiming benefits mid-year had a spouse who was already receiving Social

Security income. After age 76, both own and per capita median Social Security income decline

only modestly with age.

4.1.3 Retirement Income

Incidence of retirement income (IRA distributions plus pension and annuity income)

increases with age, with 70 percent or more of the population receiving retirement income

directly or through a spouse from age 71 through age 91 (Figure 10, bottom left panel).

Growth in own retirement income incidence increases with age—at first slowly and then

more quickly, particularly beginning at age 55 (Figure 10, bottom left panel, dark red line). The

largest percentage point increases in incidence were at certain ages related to pension rules. The

first of these ages was age 60, immediately following the elimination of the early withdrawal

penalty at age 59½ (when own incidence increases from 19 percent to 25 percent). The second

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was age 65, the normal retirement age for many DB pensions (when own incidence increases

from 37 percent to 43 percent). And the final big increase was from age 69 to age 71, around age

70½, after which distributions generally are required from IRAs and DC plans (when own

incidence increases from 52 percent to 63 percent).30 From age 72 through age 95, 64 percent or

more of the population received retirement income directly.

When looking more broadly at the share of the population who received retirement income

either directly or through a spouse, incidence was higher, particularly for individuals in

their 60s. For example, own or spouse retirement income incidence at age 43 was 10 percent,

including 3 percent of the population who only had spousal retirement income. The share with

only spousal retirement income increases with age, peaking at 12 percent at age 69—prior to the

age at which distributions are required from most IRAs and DC plans. The share with only

spousal retirement income then drops to 7 percent at age 71 and continues to decline with age

thereafter. Nevertheless, from age 71 through age 91, 70 percent or more of the population

receives retirement income directly or through a spouse.

For those with the income, median retirement income grows slowly with age after age 20

but remains fairly modest at younger ages (Figure 10, lower right panel). For example, median

own retirement income is just over $2,300 at age 30 and is $4,500 at age 40.

Growth in median amounts with age begins to accelerate around age 50, with median per

capita retirement income peaking at $15,200 at age 71. Own retirement income actually peaks at

$17,200 at age 68 and age 69, prior to required distributions from most IRAs and DC plans, and

then falls to $15,800 by age 71. Both own and per capita income then decline slowly with age

thereafter.

4.1.4 Transition into Retirement

The age patterns of income receipt suggest that, for many, retirement is more of a

transitional period than it is an event that occurs at a single point in time. Although we observe

a decline in the incidence of own labor income and an increase in the incidence of both own

In 2016, starting in the tax year an individual turns aged 70½ distributions were required from (i) traditional IRAs

and (ii) defined contribution plans after separation from employment. Distributions were not required for those aged

70½ or older from (i) Roth IRAs or (ii) defined contribution plans prior to separation from employment.

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Social Security and own retirement income over the life cycle, the year-to-year changes are not

highly correlated immediately after age 61—the ages at which many workers transition into

retirement (Figure 11, top left panel). For example, own Social Security incidence increased by

71 percentage points from age 61 to age 67, but incidence of own labor income declined by only

30 percentage points from age 61 to age 68.31

One reason the annual incidence changes were not highly correlated is that some

individuals may not have had their own labor income in the year (or years) before they first

received their own Social Security income. Indeed, the increased share of the population who

received their own Labor+SS+Retire income after age 61 suggests that some individuals had

neither their own labor income nor their own retirement income prior to claiming Social

Security benefits. In addition, another 7 percent of the population was not working and only

had own retirement income at age 61 (Figure 11, bottom left panel).

Another reason the annual incidence changes were not highly correlated is that some

individuals may have continued to work after claiming Social Security or after beginning to

receive retirement income (Figure 11, bottom left panel). For example, of those with their own

retirement income, 85 percent at age 50 and 68 percent at age 60 also had their own labor

income. Of those aged 66 who received their own Social Security income, 38 percent also

received their own labor income. For both groups, the share with labor income remained above

30 percent through age 68.

4.1.5 Labor+SS+Retire Income

When the incidence and amounts of labor, Social Security, and retirement income are

examined separately, it may be difficult to make sense of the results—especially during the

transition into retirement.

A more coherent picture emerges when looking at the share of the population with income

from at least one of these three sources: incidence is high and fairly stable during prime

working years and then increases further in retirement (Figure 12, left panel).

Because we observe annual income, we extend the labor calculation to age 68 to account for work prior to claiming

during the year the individual reaches age 67.

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The share of the population with their own income from at least one of these three sources

is much higher after age 61. Own Labor+SS+Retire income incidence peaks at 87 percent in the

mid-20s and then declines slowly with age to 82 percent at age 61. Associated with claiming of

Social Security benefits, own incidence increases sharply after age 61, averaging 95.4 percent

from age 66 through age 90.

In contrast, the share of the population receiving this income either directly or through a

spouse increases much less dramatically after age 61. Own or spouse Labor+SS+Retire income

incidence is more stable than own incidence during prime working years, equal to 90 percent or

more of the population from age 26 through age 61 and averaging 91 percent. Own or spouse

incidence also increases after age 61, albeit less dramatically than own incidence, averaging 95.7

percent from age 66 through age 90.

Although the decline in own Labor+SS+Retire income prior to age 61 is largely accounted

for by those who have a spouse with the income, the data indicate that some portion of the

population has only intermittent work prior to claiming Social Security or receiving retirement

income. In particular, Social Security benefits are only available to those who have worked, or

had a spouse who worked, long enough to qualify for benefits. In the case of Social Security

retirement benefits, the equivalent of 10 years of work is required. The increased incidence in

Labor+SS+Retire income after age 61 indicates that some individuals/couples worked long

enough to be eligible for benefits but were not employed consistently prior to claiming those

benefits.

Median own and per capita Labor+SS+Retire income follow a similar path through age 61

(Figure 12, right panel). Prior to age 14, when most with Labor+SS+Retire income are receiving

Social Security benefits, median amounts increase slowly with age to just over $5,000 at age 13.

As the share with labor income then increases with age, median amounts decline to just under

$2,200 at age 16 and then increase with age, with both own and per capita median

Labor+SS+Retire income peaking at over $41,000 at age 46. Median amounts then decline slowly

until age 61, to just under $37,000.

Immediately after age 61, per capita amounts of Labor+SS+Retire income decline more

slowly with age than own amounts because the share of two-income married couples increases.

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The sharp increase in own Labor+SS+Retire income incidence after age 61 is associated with a

sharp decline in own median amounts—which is consistent with individuals who previously

had no income beginning to receive relatively low amounts. But because many of those without

own Labor+SS+Retire income at age 61 were married individuals who had a spouse with the

income, the decline in per capita amounts is much less dramatic.

4.2 Income Sources and Amounts by Age and Income

The transition from relying primarily on labor income to relying primarily on retirement

and/or Social Security income tends to occur at younger ages for lower-income individuals. For

the lowest income ventiles, a good deal of this transition occurs prior to the early claiming age

for Social Security retirement benefits (age 62). For example, at age 61 fewer than half of

individuals in ventile 2 and ventile 3 receive labor income either directly or through spouse

while more than half receive Social Security income. More generally, higher income individuals

are more likely to work longer and to delay claiming Social Security benefits.

In retirement, the relative importance of Social Security and retirement income varies

considerably across the income distribution. Individuals in the lowest income ventiles are much

less likely to have retirement income and those who do generally have small amounts. The

importance of retirement income, however, increases rapidly with income. At age 72, for

example, 90 percent of individuals in ventile 10 receive retirement income either directly or

through a spouse, with the median amount per capita equal to $12,000.

4.2.1 Labor Income

Perhaps not surprisingly, the lowest income ventiles are much less likely to have labor

income during typical working years (Figure 13). Most individuals have their own labor income

in their early to mid-20s regardless of income rank. At age 25, own labor income incidence

ranges from 77 percent for the lowest-income ventile to 97 percent for the eight highest-income

ventiles. Long before typical retirement ages, however, labor income becomes much less

prevalent for the lowest income ventiles

Through age 50, ventiles 11 through 19 all have similar age patterns of labor income

incidence (Figure 13, top panel). For this group as a whole, own labor incidence is 97 percent at

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age 25, falls modestly through the early 30s, and then stabilizes, averaging 92 percent from age

33 through age 50. This decline in own incidence is largely attributable to married individuals

with working spouses, as the share who receive labor income either directly or through a

spouse averages 99 percent from age 25 through age 50

For the lower income ventiles (Figure 13, bottom panel), the drop in own labor income

incidence after the mid-20s is progressively more pronounced as income-rank falls, although it

only translates into a fall in own or spouse incidence for the lowest income ventiles. For

example, own or spouse labor income incidence for ventile 5 is 93 percent from age 33 through

age 42—the same as it was at age 25—and is 90 percent or more until age 50. In contrast, own or

spouse incidence falls consistently over these ages for the bottom three ventiles, with only about

two-thirds receiving labor income, either directly or through a spouse, at age 50.

The highest income ventile has a unique age profile (Figure 13, top panel). Like the lower

income ventiles, own labor income incidence falls substantially with age—from 97 percent at

age 25 to just over 80 percent at age 50. Like the higher income ventiles, however, own or

spouse labor income incidence remains high and stable, remaining at 98 percent from age 25

through age 44, and is still at 97 percent at age 50.

After age 50, labor income incidence falls across all ventiles with declines accelerating after

age 61, but the declines typically occur at younger ages in the lower income ventiles (Figure 13).

For example, by age 61, own labor incidence is 40 percent or less for the three lowest income

ventiles, and own or spouse labor incidence is below 50 percent. In contrast, own labor

incidence for ventile 11 is just over 75 percent at age 61 and own or spouse labor incidence is

nearly 90 percent. Own labor incidence for ventile 11 does not fall to 40 percent until age 67 and

own or spouse labor incidence does not fall below 50 percent until age 69.

Once again, the highest income ventile has a unique age profile after age 50. Compared

with the rest of the top half of the income distribution, the top ventile has much lower own—

and slightly lower own or spouse—labor income incidence through the late 50s but has the

highest incidence of both at ages 64 and older. At age 75, more than half of the top income

ventile receives labor income, either directly or through a spouse.

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Conditional on working, own and per capita labor income generally peaks in the mid- to

late-40s, declines modestly through the early to mid-60s, and then declines more rapidly

(Figure 14). The lone exception is the lowest income quintile, where median labor income tends

to drift upward with age even as the share working declines.

Labor income is relatively modest for most workers (Figure 14). At age 46, both own and

per capita median labor income peak around $20,000 for ventile 5 and below $40,000 for

ventile 10. Peak median labor income exceeds $100,000 only for the top two ventiles.

Labor income follows a similar pattern by age for ventiles 3 through 18 (the middle 80

percent of the income distribution). For these ventiles, both own and per capita median labor

income peak in the mid- to late-40s and are 95 percent or more of the peak amounts from age 43

through age 55. The decline in earnings with age accelerates after age 61, albeit more quickly for

the lower income ventiles. At age 73, both own and per capita median labor income are less

than 30 percent of the peak amounts for ventiles 3 through 18.

Compared with the middle income ventiles, earnings initially fall more quickly with age

after reaching their peak for the top two income ventiles, but then fall more slowly after age 61.

For example, median own labor income at age 61 is only 77 percent of peak earnings for

ventile 20, compared with an average of 89 percent for ventiles 3 through 18. At age 73,

however, median earnings for ventile 20 are still 38 percent their peak, compared with 26

percent of their peak, on average, for ventiles 3 through 18.

The importance of labor income thus declines at older ages both because fewer individuals

work (or have a spouse who does) and because those who continue to work typically earn less

than younger workers. For those with income from work at age 75, for example, median per

capita labor income is below $10,000 for the bottom 14 ventiles and below $20,000 for the

bottom 18 ventiles.

4.2.2 Social Security and Retirement Income

For those younger than age 60—when own Social Security income primarily represents

disability benefits—Social Security incidence generally declines with income (Figure 15, left

panels). At these younger ages, incidence is typically highest among individuals in the second

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and third ventiles, with about one-in-four individuals in these income groups already receiving

their own Social Security benefits by age 50 and about four-in-ten receiving it by age 59.

For those aged 60 or older, lower income is associated with earlier claiming of Social

Security retirement benefits (Figure 16, left panel).32 Of the increase in own Social Security

income incidence observed between age 59 and age 72, 60 percent occurred by age 63 for the

lowest five ventiles, on average, whereas only about 20 percent occurred at age 66 (the full

benefit age) or older.33 In contrast, only 20 percent of the increase in own Social Security

incidence occurred by age 63 for the top five ventiles, on average, while 65 percent occurred at

age 66 or older.

At age 70, nearly all received Social Security benefits either directly or through a spouse

(Figure 16, right panel), and incidence remains high at older ages (Figure 15, right panels). At

age 72, for example, ventile one has the lowest own or spouse Social Security incidence at

90 percent. Incidence for the other ventiles ranges from 97 percent for ventiles 18 and 19 up to

99 percent for ventiles 4 through 12.

Consistent with Social Security’s progressive benefit formula, median Social Security

income for those aged 70 or older differs more among the bottom five ventiles than it does

among the top 15 ventiles (Figure 17). Social Security benefits are designed to replace a high

share of wages for workers with low lifetime earnings but increase more slowly as lifetime

earnings increase.

Controlling for income rank among those aged 70 or older, median Social Security income

has a relatively flat age profile for the bottom income ventiles but is typically higher for younger

cohorts in the top income ventiles (Figure 17).34 For all but the lowest three ventiles, median

The figure reports any Social Security (retirement, survivor, or disability) receipt, but after age 60, the largest

incidence changes are from retirement or survivor claims.

32

33

Age 66 is the full benefit age for individuals aged 62 through 73 at year-end 2016 (see note 29).

There are multiple, possibly offsetting, reasons median own Social Security income would differ by age. First,

younger higher earners would have higher benefits because the maximum amount of annual earnings on which taxes

were collected—and, thus, the maximum amount of annual earning on which benefit calculations were based—

increased substantially in the 1970s and early 1980s, from roughly 125 percent of the average wage index (AWI) in

1972 to roughly 235 percent of AWI in 1983. All else equal, this would increase benefits for those earning above

125 percent of AWI but would not impact other workers. Second, average real earnings have increased over time

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own income is at least modestly higher for younger cohorts. Median per capita Social Security

income, however, is consistently higher for younger cohorts only for those in the top of the

income distribution.

Incidence of income from pensions, annuities, and IRAs generally increases with income

for both the young and the old, although incidence peaks below the top ventile for those older

than age 35 (Figure 18). Retirement income incidence for ventile 20 is lowest relative to the rest

of the top half of the income distribution for individuals in their 60s, who are not yet required to

take retirement plan distributions (Figure 18, top panels). Much of that difference disappears

between age 69 and age 72, however, when incidence increases most sharply for the top income

ventile.

Controlling for individuals’ income rank within their birth cohort, retirement income

incidence generally follows a similar pattern by age—increasing most rapidly from the late 50s

through the early 70s and then remaining about the same at older ages. The lowest income

ventile is an exception to this rule, with incidence peaking for those aged 61.

Among individuals aged 70 or older, incidence of retirement income increases rapidly with

income for the bottom half of the income distribution, while nearly all in the top half of the

income distribution receive the income. At age 72, for example, 90 percent of ventile 10 received

retirement income either directly or through a spouse, compared with 54 percent of ventile 5.

For the top half of the income distribution, own or spouse incidence at age 72 ranges from

91 percent for ventile 11 up to 94 percent for ventiles 17 through 19.

Among those aged 70 or older with the income, median retirement income varies much

more across income ventiles than does median Social Security income (Figures 17 and 19).

Within each birth cohort aged 70 or older, median retirement income for ventile 10 is more than

which, all else equal, would result in younger cohorts having higher benefits across the income distribution.

Counteracting these two changes, the full benefit age increased from age 65 for those born in 1937 or earlier (aged 79

or older in 2016) to age 66 for those born from 1943 to 1954 (aged 62 to 73 in 2016). For those claiming at age 65, this

change would have reduced benefits by 6.7 percent. In addition, differential mortality can affect median benefits.

Differential mortality by income would tend to increase median benefits for older individuals, as those with higher

lifetime earnings—and, thus, higher Social Security benefits—would be more likely to survive to older ages.

Differential mortality by gender could also affect median benefits, but the availability of survivor benefits makes it

unclear what that impact would be.

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triple that of ventile 5, and median retirement income for ventile 15 is more than twice that of

ventile 10. At age 72, for example, median per capita retirement income is $3,350 for ventile 5,

$12,000 for ventile 10, and $26,000 for ventile 15.

Controlling for income rank among those aged 70 or older, median retirement income is

typically higher for younger cohorts (Figure 19). The exceptions are the two highest income

ventiles, with median retirement income having a relatively flat age profile for ventile 19 and

increasing with age for ventile 20. Retirement income declines with age for the other ventiles,

with the largest declines near the middle of the income distribution. For example, median percapita retirement income of ventile 10 is 40 percent higher for those in their early 70s (averaging

just over $12,000) than for those in their late 80s (averaging $8,700).

To better illustrate how the relative importance of Social Security and retirement income

varies with total income, Figure 20 shows the incidence and conditional median amounts of

those two income sources for all 20 ventiles among individuals for a single birth-year cohort—

those aged 72 in 2016.

Regardless of income, nearly all received Social Security benefits—either directly or

through a spouse—at age 72 (Figure 20, top panel). Most of those without Social Security who

have lower income in retirement presumably did not work long enough to qualify for benefits,

nor did they have a spouse who did.35 Those without Social Security who have higher income in

retirement were most likely former government workers who, because they were covered by an

alternative pension system, were not required to participate in Social Security.

In contrast to Social Security income, the share who received retirement distributions at

age 72 varied considerably across the income distribution. Individuals in the lowest income

ventiles were unlikely to have retirement income but incidence increases sharply with income,

with own or spouse retirement income incidence greater than 50 percent for ventile 5 and

higher, 75 percent or more for ventile 7 and higher, and 90 percent or more for ventile 10 and

higher.

Individuals are required to have the equivalent of 10 years of covered employment to qualify for Social Security

benefits. Individuals who do not qualify based on their own work history, however, would be eligible to receive

spousal or survivor benefits if they were married, for 10 years or longer, to a worker who qualified for Social Security

benefits. See note 25 for a further explanation of how we measure receipt of own Social Security income.

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Median retirement income also varies more by income ventile than does median Social

Security income (Figure 20, bottom panel). Not only are those with lower income less likely to

have retirement income, but those who do typically receive modest amounts. Median per capita

retirement income increases rapidly as total income increases, however, and is greater than

median Social Security benefits for ventile 13 and higher (representing the top 40 percent of the

population).

4.2.3 Labor+SS+Retire Income

For most income ventiles, the share of working-age individuals with own Labor+SS+Retire

income peaks for those in their late teens or early 20s, declines with age through the early to

mid-30s, and then remains fairly stable through age 61 (Figure 21, left panels). For ventiles 9

through 19, for example, own Labor+SS+Retire income incidence is 98 percent or higher at

age 19 (not shown on the chart) and remains 90 percent or higher through age 61.

This pattern differs for both the lowest income ventile and the highest income ventile. For

ventile 1, own Labor+SS+Retire income incidence falls fairly steadily with age, from 80 percent

in the late 20s to only 63 percent at age 61. For ventile 20, own Labor+SS+Retire income

incidence is 97 percent from age 20 through age 25, but then declines to 90 percent at age 35 and

is 85 percent or less from age 43 through age 61.

Among higher income ventiles, most without their own Labor+SS+Retire income have a

spouse with the income. For ventiles 9 through 19, for example, own or spouse Labor+SS+Retire

income incidence is 98 percent or higher from age 24 through age 61. At 98 percent from age 24

through age 48, own or spouse incidence is also high for ventile 20, but it falls to 96 percent

from age 59 through age 61—which is lower incidence at those ages than all but ventiles 1

through 4.

Although many in the lowest income ventiles without their own Labor+SS+Retire income

also have a spouse with the income, there are more individuals in these ventiles who receive,

either directly or through a spouse, only non-Labor+SS+Retire income.36 For ventile 4, for

Note that only individuals with positive per capita total income are included in the ventiles, so those included in a

ventile without own or spouse Labor+SS+Retire income have own or spouse income from some other source. As

36

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example, own or spouse Labor+SS+Retire income incidence is 90 percent or less from age 32

through age 39 but increases back up to 95 percent or more from age 54 through age 61. For

ventile 1, own or spouse incidence falls from 82 percent at age 30 to 73 percent from age 57

through age 61.

After age 61, own Labor+SS+Retire income incidence increases sharply across all ventiles

and own or spouse incidence increases among the lower income ventiles. By age 72, essentially

all have Labor+SS+Retire income in the top 19 income ventiles. Ventile 1 has the lowest

incidence at age 72, with 94 percent having their own Labor+SS+Retire income and 95 percent

receiving the income directly or through a spouse.

Labor+SS+Retire income is more evenly distributed at older ages than it is at younger ages

(Figure 22). Conditional on having the income, the amount of median Labor+SS+Retire income

follows a hump-shaped pattern with age for all but the lowest income ventiles—which have flat

or increasing income at older ages. As was the case with total income, median Labor+SS+Retire

income typically peaks in the mid- to late-40s, with the largest declines at older ages occurring

in the highest income ventiles. Unlike total income, however, Labor+SS+Retire income continues

to decline more rapidly with age for the highest income ventiles even after age 70. After age 70

median per capita Labor+SS+Retire income changes little with age at the bottom of the income

distribution, declines about 1 percent per year in the middle, and declines by about 2 percent

per year at the top.

4.3 Income Shares

To better quantify the importance of different types of income, this section analyzes the

share of total income from different sources. These measures capture both the likelihood that

individuals have a particular source of income—either directly or through a spouse—and the

amount received by those who have the income.

For each individual we calculate income shares as:

noted earlier in the text, 3.5 percent of the population, on average, has only non-Labor+SS+Retire income from age 18

through age 61, with that share falling to less than 0.5 percent from age 70 through age 94.

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𝑆𝑖 =

𝑋𝑖

𝑍𝑖

Where S = share of per capita total income from a given source37

X= per capita income from a given source,

Z = per capita total income, and

i indexes individuals

4.3.1 Labor+SS+Retire Income Share

Regardless of age, most individuals received most of their income from some combination

of labor, Social Security, and retirement income (that is, IRA distributions and pension and

annuity income). The median share from Labor+SS+Retire income was 100 percent from age 20

through age 71 and remained 99 percent or higher after age 71 (Figure 23, orange line). The 25th

percentile of the Labor+SS+Retire income share declines with age but was below 99 percent only

for individuals older than age 52 and was below 95 percent only for individuals older than

age 73 (Figure 23, lower blue line).

It is only in the highest income ventiles at older ages where the typical individual received

more than a de minimis share of their total income from non-Labor+SS+Retire income

(Figure 24). At age 50, for example, the median Labor+SS+Retire income share was 95 percent

for ventile 20 and either 100 percent or slightly below for the other 19 ventiles. The importance

of non-Labor+SS+Retire income generally increases with age, especially for the highest income

ventiles. At age 75, for example, the median Labor+SS+Retire income share was just under

70 percent for ventile 20 and a bit over 90 percent for ventile 19.

4.3.2 Labor Income Share

The typical individual gets 100 percent of their total income from labor from age 16 through

the mid-50s but gets no labor income at age 68 (Figure 25, top panel, orange line). The 25th

percentile (lower blue line) and the 75th percentile (higher blue line) illustrate the range of

For individuals with positive source income and negative total income, the income share from that source is set to

100 percent. For individuals with negative source income—which can only occur in the case of non-Labor+SS+Retire

income and some of its components—the income share from that source is set to zero. Because both negative total

income and negative source income are uncommon, individuals to whom these income shares are assigned are

unlikely to determine the 25th percentile, median, or 75th percentile.

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experience across the population. For example, while the typical individual got nearly all their

income from labor at age 55, 25 percent received 68 percent or less of their income from labor.

Conversely, while the typical individual had no labor income at age 68, 25 percent received 40

percent or more of their income from labor.

Across the income distribution we see a similar age pattern in the labor income share but

the shift away from labor income typically occurs at younger ages for lower income ventiles

(Figure 26).

There is not much variation in the age pattern of labor income across, or within, the middle

income ventiles. For ventiles 7 through 15, the median labor income share is 100 percent from

age 20 through age 55, does not fall below 95 percent until age 60, and hits zero at age 67 or

older.

For the highest income ventiles, the age pattern is similar to that of the middle income

ventiles, but the rapid declines in labor income shares tend to occur at slightly older ages. For

example, the median labor income share for the highest income ventile does not hit zero until

age 76.

For lowest income ventiles, in contrast, the transition away from labor income occurs at

younger ages. In the case of the three lowest income ventiles, the transition largely occurs before

the early claiming age for Social Security benefits. For example, the median labor income share

for ventile 2 falls below 95 percent at age 52 and hits zero at age 61.

4.3.3 Social Security and Retirement Income Shares

As labor income declines during the transition into retirement, Social Security and

retirement income increase in importance (Figure 25, middle and bottom panels) although the

relative importance of those two income sources varies considerably across the population

(Figures 27 and 28).

The share of income from Social Security increases rapidly in the 60s and early 70s and then

remains fairly steady through the mid-80s (Figure 25, middle panel). By age 75, the typical

individual gets just over half of their total income from Social Security. That share varies

considerably across the population, however, with 25 percent getting 85 percent or more of their

income from Social Security at age 75 and 25 percent getting one-third or less.

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The retirement income share follows a similar pattern by age as Social Security—increasing

in the 60s and early 70s and remaining fairly steady through the mid-80s—but the share of total

income is typically lower (Figure 25, bottom panel). By age 75, the median retirement income

share is 27 percent, with 25 percent of the population getting more than half of their income

from retirement plans and 25 percent getting little to no retirement income.

Much of the variation in Social Security and retirement income shares across the population

is related to income.

Although few get Social Security income before age 60, disability benefits represent a large

share of income for a substantial minority of individuals in some of the lower income ventiles

(Figure 27). One-quarter of individuals in ventiles 2 and 3, for example, get all their income

from Social Security at age 55.

Reflecting the progressive benefit formula, Social Security income is more important in

retirement for lower income individuals (Figure 27). The median Social Security income share

increases more sharply and at younger ages for those in the lowest income ventiles. At age 75,

the median share of income from Social Security was 100 percent for the three lowest income

ventiles, was below 50 percent by ventile 12, and was below 33 percent for the highest four

income ventiles.

Consistent with having lower Social Security income shares, retirement plan distributions

were most important for retirees with moderate to moderately high income (Figure 28). At

age 75, the median retirement income share was zero for the four lowest income ventiles, rises

above 30 percent for ventile 9, and peaks above 50 percent for ventiles 15 through 19.

Retirement income is less important for the highest income ventile, with the median retirement

income share below that of ventile 9 at age 75 and generally below that of ventile 11 throughout

retirement.

Those in their 70s and early 80s are less reliant on Social Security than older cohorts, with

the median Social Security income share increasing, and the median retirement income share

decreasing, after age 85 (Figure 25, middle and bottom panels). The reduced reliance on Social

Security among more recent retiree cohorts is most prominent among the middle- and lowermiddle income ventiles (Figure 27). The largest increases in median Social Security income

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shares at older ages occur in ventiles 6 through 12. In contrast, the lowest income ventiles are

heavily reliant on Social Security regardless of age and the age profile of the Social Security

income share is relatively flat for the highest income ventiles.

4.4 Summary of Changes in the Composition of Income over the Life Cycle

Throughout their lifetimes, most Americans get most of their income from three sources

ultimately derived from work—labor, Social Security, and retirement income. Older individuals

in the highest income ventiles were the only groups who typically received more than a de

minimis amount income from other sources.

For many individuals, retirement is a transitional period, taking place over a number of

years rather than at a single point in time. Some stop working prior to claiming Social Security,

others continue working after claiming Social Security. Some begin receiving retirement income

before claiming Social Security, with the majority of those continuing to work. Others claim

Social Security benefits but delay drawing down retirement accounts until required to do so by

law.

This finding has two implications for those studying retirement. First, changes in income

should be analyzed over a period of years rather than attempting to define retirement as an

event that occurs at a single point in time and looking at changes in income around that event.

Second, analysis of retirement should analyze comprehensive measures of income rather than,

say, comparing labor income immediately before a retirement event to Social Security or

retirement income immediately after the event.

This transition from relying primarily on labor income to relying primarily on retirement

and/or Social Security income tends to occur at younger ages for lower-income individuals. For

the lowest income ventiles, a good deal of this transition occurs prior to the early claiming age

for Social Security retirement benefits (age 62). For example, at age 61 fewer than half of

individuals in ventile 2 and ventile 3 received labor income either directly or through a spouse

while more than half received Social Security income. For the typical individual in the middle

and upper income ventiles, this transition takes place after age 61, with higher income workers

more likely to delay claiming Social Security benefits and work longer.

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After age 70, most retirees receive both Social Security and retirement income. From age 71

through age 91, own or spouse incidence was 93 percent or higher for Social Security income

and 70 percent or higher for retirement income. Over this same age range, the share of the

population with both sources of income ranged from 68 percent to 70 percent.

Among those over age 70, the relative importance of Social Security and retirement income

varies considerably by income. Regardless of income, most receive Social Security income, and,

because of the progressive benefit formula, the amounts received vary only modestly with

income. In contrast, the lowest income ventiles are much less likely to receive retirement

income, and those who do receive fairly modest amounts. Further, while most in the middle

and upper income ventiles have retirement income, the amounts vary more with income than

do the amounts of Social Security income. As a result, the share of income that retirees get from

Social Security falls rapidly as income rank increases. At age 75, for example, the median share

of income from Social Security was 100 percent for the three lowest income ventiles, was below

50 percent by ventile 12, and was below 33 percent for the highest four income ventiles.

As with previous work using tax data, we find that retirement income—that is, IRA

distributions plus pension and annuity income—is much more prevalent than reported in

household survey data. We also show that, other than retirees in the lowest income ventiles,

retirement income is both common and substantial. At age 72, for example, 90 percent of

individuals in ventile 10 received retirement income either directly or through a spouse, with

the median amount per capita equal to $12,000.

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A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

5. Conclusion

In this study, we use administrative tax data to build a unique cross-sectional data set that

is representative of the 2016 US population. These data allow us to observe changes in the

amount and composition of individuals’ income by single year of age and, within each age

cohort, by income. By looking over the entire life cycle, this study complements Brady and

Bass (2023a), which used panel data to follow individuals from age 55 to age 72.

Throughout their lifetimes, most Americans get most of their income from three sources:

labor income (wage and salary, self-employment earnings, and unemployment compensation),

Social Security income (disability and retirement benefits), and retirement income (IRA

distributions and income from pensions and annuities). Among those with income, the typical

adult gets 100 percent of their income from labor prior to age 55 but has no labor income after

age 67.

The data suggests that retirement is better thought of as a transitional process rather than a

single point in time. The transition from relying primarily on labor income to relying primarily

on retirement and/or Social Security income often occurs over a number of years and typically

occurs at younger ages for lower-income individuals. For the bottom 15 percent of the

population, much of the transition away from labor income occurs prior to age 62.

After age 70, most retirees receive both Social Security and retirement income. Consistent

with previous research using tax data, we find much higher incidence of income from employer

plans and IRAs than reported in household survey data. From age 71 through age 91, own or

spouse incidence was 93 percent or higher for Social Security income and 70 percent or higher

for retirement income.

Income composition varies considerably across the income distribution, with lower income

retirees typically getting all their income from Social Security and retirement income increasing

in importance as total income increases. The typical individual in their 70s got about half their

income from Social Security.

We do not find a drop in spendable income at the ages normally associated with the

transition from work to retirement. In fact, from age 61 through age 70, we find an increase in

both the share of the population with income and the median amount of spendable income that

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A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

those individuals have. More broadly looking over the entire life cycle, spendable income

typically follows a hump-shaped pattern with age, peaking at age 46.

Despite relying more on Social Security in retirement, the age profile of spendable income

is much flatter for lower income groups. Comparing individuals with the same income rank

within their age group, the spendable income of the lowest income groups falls the least in

retirement—relative to both those in their mid-40s and those aged 61.

The results of this study challenge two widely held beliefs about the US retirement system.

The data show that spendable income does not decline rapidly at older ages, and—when

compared to those of similar income rank within their age groups—falls the least at the bottom

of the income distribution. The data also show that most retirees rely on a combination of Social

Security benefits and retirement plan distributions in retirement.

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A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

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ƚĂdžĞƐƉĂŝĚĚŝǀŝĚĞĚďLJƚŽƚĂůŝŶĐŽŵĞ͘DĞĚŝĂŶƐĂƌĞƚŚĞŵĞĚŝĂŶƌĂƚĞĂĐƌŽƐƐŝŶĚŝǀŝĚƵĂůƐǁŝƚŚƚŽƚĂůŝŶĐŽŵĞ͕ƌĞŐĂƌĚůĞƐƐŽĨ

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EŽƚĞ͗sĂůƵĞƐĂƌĞůĂďĞůĞĚĂƚĂŐĞƐϯϬ͕ϰϲ͕ϲϭ͕ĂŶĚϳϱ͘

^ŽƵƌĐĞ͗ƵƚŚŽƌƐ ƚĂďƵůĂƚŝŽŶŽĨ/Z^ĚĂƚĂ

Brady and Bass

50

December 10, 2024

A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

&ŝŐƵƌĞϲ

dŽƚĂů/ŶĐŽŵĞ&ĂůůƐDŽƌĞYƵŝĐŬůLJĨƚĞƌŐĞϲϭĨŽƌ,ŝŐŚĞƌ/ŶĐŽŵĞsĞŶƚŝůĞƐ

DĞĚŝĂŶƉĞƌĐĂƉŝƚĂƚŽƚĂůŝŶĐŽŵĞΎďLJĂŐĞ ĂŶĚŝŶĐŽŵĞǀĞŶƚŝůĞ ͕ϮϬϭϲ;ƚŚŽƵƐĂŶĚƐŽĨĚŽůůĂƌƐͿ

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ŐƌŽƵƉƐŽƌΗǀĞŶƚŝůĞƐΗǁŝƚŚǀĞŶƚŝůĞϭŚĂǀŝŶŐƚŚĞůŽǁĞƐƚŝŶĐŽŵĞĂŶĚǀĞŶƚŝůĞϮϬŚĂǀŝŶŐƚŚĞŚŝŐŚĞƐƚŝŶĐŽŵĞ͘dŚĞϬ͘ϳƉĞƌĐĞŶƚ

ŽĨƚŚĞƐĂŵƉůĞǁŝƚŚŶŽŶͲƉŽƐŝƚŝǀĞƚŽƚĂůŝŶĐŽŵĞĂƌĞŝŶĐůƵĚĞĚŝŶƚŚĞƚŽƚĂůƐďƵƚŶŽƚƉƌĞƐĞŶƚĞĚƐĞƉĂƌĂƚĞůLJŚĞƌĞ͘

^ŽƵƌĐĞ͗ƵƚŚŽƌƐ ƚĂďƵůĂƚŝŽŶŽĨ/Z^ĚĂƚĂ

Brady and Bass

51

December 10, 2024

A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

&ŝŐƵƌĞϳĂ

DŝĚĚůĞ/ŶĐŽŵĞsĞŶƚŝůĞƐdžƉĞƌŝĞŶĐĞƚŚĞ^ŚĂƌƉĞƐƚƌŽƉŝŶdĂdžZĂƚĞƐĨƚĞƌŐĞϲϭ

DĞĚŝĂŶƚŽƚĂůĨĞĚĞƌĂůƚĂdžƌĂƚĞƐΎďLJĂŐĞ ĂŶĚŝŶĐŽŵĞǀĞŶƚŝůĞ͕ ϮϬϭϲ;ƉĞƌĐĞŶƚĂŐĞͿ

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ŝŶĐŽŵĞ͘

ĞĐĂƵƐĞŽĨƐĂŵƉůĞƐŝnjĞůŝŵŝƚĂƚŝŽŶƐ͕ƚŚŝƐĐŚĂƌƚƉƌĞƐĞŶƚƐĚĂƚĂĨƌŽŵĂŐĞϮϬƚŽĂŐĞϵϴ͘

&ŽƌĂĚĞƐĐƌŝƉƚŝŽŶŽĨƚŚĞŝŶĐŽŵĞǀĞŶƚŝůĞƐ͕ƐĞĞƚŚĞŶŽƚĞŽŶ&ŝŐƵƌĞϲ͘

^ŽƵƌĐĞ͗ƵƚŚŽƌƐ ƚĂďƵůĂƚŝŽŶŽĨ/Z^ĚĂƚĂ

Brady and Bass

52

December 10, 2024

ϭϬϬн

A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

&ŝŐƵƌĞϳď

DŝĚĚůĞ/ŶĐŽŵĞsĞŶƚŝůĞƐdžƉĞƌŝĞŶĐĞƚŚĞ^ŚĂƌƉĞƐƚƌŽƉŝŶdĂdžZĂƚĞƐĨƚĞƌŐĞϲϭ;ĐŽŶƚŝŶƵĞĚͿ

dŽƚĂůĨĞĚĞƌĂůƚĂdžƌĂƚĞƐΎďLJĂŐĞ ĂŶĚŝŶĐŽŵĞǀĞŶƚŝůĞ͕ ϮϬϭϲ;ƉĞƌĐĞŶƚĂŐĞͿ

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ĞĐĂƵƐĞŽĨƐĂŵƉůĞƐŝnjĞůŝŵŝƚĂƚŝŽŶƐ͕ƚŚŝƐĐŚĂƌƚƉƌĞƐĞŶƚƐĚĂƚĂĨƌŽŵĂŐĞϮϬƚŽĂŐĞϵϴ͘

&ŽƌĂĚĞƐĐƌŝƉƚŝŽŶŽĨƚŚĞŝŶĐŽŵĞǀĞŶƚŝůĞƐ͕ƐĞĞƚŚĞŶŽƚĞŽŶ&ŝŐƵƌĞϲ͘

^ŽƵƌĐĞ͗ƵƚŚŽƌƐ ƚĂďƵůĂƚŝŽŶŽĨ/Z^ĚĂƚĂ

Brady and Bass

53

December 10, 2024

A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

&ŝŐƵƌĞϳĐ

DŝĚĚůĞ/ŶĐŽŵĞsĞŶƚŝůĞƐdžƉĞƌŝĞŶĐĞƚŚĞ^ŚĂƌƉĞƐƚƌŽƉŝŶdĂdžZĂƚĞƐĨƚĞƌŐĞϲϭ;ĐŽŶƚŝŶƵĞĚͿ

WĂLJƌŽůůƚĂdžƌĂƚĞƐΎďLJĂŐĞ ĂŶĚŝŶĐŽŵĞǀĞŶƚŝůĞ͕ ϮϬϭϲ;ƉĞƌĐĞŶƚĂŐĞͿ

ϳϱƚŚƉĞƌĐĞŶƚŝůĞ

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ĞĐĂƵƐĞŽĨƐĂŵƉůĞƐŝnjĞůŝŵŝƚĂƚŝŽŶƐ͕ƚŚŝƐĐŚĂƌƚƉƌĞƐĞŶƚƐĚĂƚĂĨƌŽŵĂŐĞϮϬƚŽĂŐĞϵϴ͘

&ŽƌĂĚĞƐĐƌŝƉƚŝŽŶŽĨƚŚĞŝŶĐŽŵĞǀĞŶƚŝůĞƐ͕ƐĞĞƚŚĞŶŽƚĞŽŶ&ŝŐƵƌĞϲ͘

^ŽƵƌĐĞ͗ƵƚŚŽƌƐ ƚĂďƵůĂƚŝŽŶŽĨ/Z^ĚĂƚĂ

Brady and Bass

54

December 10, 2024

A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

&ŝŐƵƌĞϳĚ

DŝĚĚůĞ/ŶĐŽŵĞsĞŶƚŝůĞƐdžƉĞƌŝĞŶĐĞƚŚĞ^ŚĂƌƉĞƐƚƌŽƉŝŶdĂdžZĂƚĞƐĨƚĞƌŐĞϲϭ;ĐŽŶƚŝŶƵĞĚͿ

&ĞĚĞƌĂůŝŶĐŽŵĞƚĂdžƌĂƚĞƐΎďLJĂŐĞ ĂŶĚŝŶĐŽŵĞǀĞŶƚŝůĞ͕ ϮϬϭϲ;ƉĞƌĐĞŶƚĂŐĞͿ

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ĞĐĂƵƐĞŽĨƐĂŵƉůĞƐŝnjĞůŝŵŝƚĂƚŝŽŶƐ͕ƚŚŝƐĐŚĂƌƚƉƌĞƐĞŶƚƐĚĂƚĂĨƌŽŵĂŐĞϮϬƚŽĂŐĞϵϴ͘

&ŽƌĂĚĞƐĐƌŝƉƚŝŽŶŽĨƚŚĞŝŶĐŽŵĞǀĞŶƚŝůĞƐ͕ƐĞĞƚŚĞŶŽƚĞŽŶ&ŝŐƵƌĞϲ͘

^ŽƵƌĐĞ͗ƵƚŚŽƌƐ ƚĂďƵůĂƚŝŽŶŽĨ/Z^ĚĂƚĂ

Brady and Bass

55

December 10, 2024

A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

&ŝŐƵƌĞϴ

>ĂƌŐĞƐƚ^ƉĞŶĚĂďůĞ/ŶĐŽŵĞĞĐůŝŶĞƐŵŽŶŐ,ŝŐŚĞƐƚ/ŶĐŽŵĞĞƐƉŝƚĞZĞĚƵĐƚŝŽŶŝŶdĂdžĞƐ

DĞĚŝĂŶƉĞƌĐĂƉŝƚĂŝŶĐŽŵĞΎďLJĂŐĞ ĂŶĚŝŶĐŽŵĞǀĞŶƚŝůĞ͕ ϮϬϭϲ;ƚŚŽƵƐĂŶĚƐŽĨĚŽůůĂƌƐͿ

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ĞĐĂƵƐĞŽĨƐĂŵƉůĞƐŝnjĞůŝŵŝƚĂƚŝŽŶƐ͕ƚŚŝƐĐŚĂƌƚƉƌĞƐĞŶƚƐĚĂƚĂĨƌŽŵĂŐĞϮϬƚŽĂŐĞϵϴ͘

&ŽƌĂĚĞƐĐƌŝƉƚŝŽŶŽĨƚŚĞŝŶĐŽŵĞǀĞŶƚŝůĞƐ͕ƐĞĞƚŚĞŶŽƚĞŽŶ&ŝŐƵƌĞϲ͘

^ŽƵƌĐĞ͗ƵƚŚŽƌƐ ƚĂďƵůĂƚŝŽŶŽĨ/Z^ĚĂƚĂ

Brady and Bass

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December 10, 2024

A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

&ŝŐƵƌĞϵ

/ŶĐŝĚĞŶĐĞŽĨEŽŶͲ>ĂďŽƌн^^нZĞƚŝƌĞ/ŶĐŽŵĞ/ŶĐƌĞĂƐĞƐǁŝƚŚŐĞ͕ŵŽƵŶƚƐdLJƉŝĐĂůůLJDŽĚĞƐƚ

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EŽŶͲ>ĂďŽƌн^^нZĞƚŝƌĞŝŶĐŽŵĞ

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^ŽƵƌĐĞ͗ƵƚŚŽƌƐ ƚĂďƵůĂƚŝŽŶŽĨ/Z^ĚĂƚĂ

Brady and Bass

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December 10, 2024

A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

&ŝŐƵƌĞϭϬ

dƌĂŶƐŝƚŝŽŶĨƌŽŵ>ĂďŽƌƚŽ^ŽĐŝĂů^ĞĐƵƌŝƚLJĂŶĚZĞƚŝƌĞŵĞŶƚKĐĐƵƌƐŽǀĞƌƚŚĞ>ŝĨĞLJĐůĞ

/ŶĐŝĚĞŶĐĞĂŶĚĐŽŶĚŝƚŝŽŶĂůŵĞĚŝĂŶŝŶĐŽŵĞďLJĂŐĞ͕ΎϮϬϭϲ

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ŵĞĚŝĂŶƌĞƚŝƌĞŵĞŶƚŝŶĐŽŵĞŝƐƉƌĞƐĞŶƚĞĚďĞŐŝŶŶŝŶŐĂƚĂŐĞϴ͘

EŽƚĞ͗sĂůƵĞƐĂƌĞůĂďĞůĞĚĂƚĂŐĞƐϯϬ͕ϰϲ͕ϲϭ͕ĂŶĚϳϱ͘

^ŽƵƌĐĞ͗ƵƚŚŽƌƐ ƚĂďƵůĂƚŝŽŶŽĨ/Z^ĚĂƚĂ

Brady and Bass

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December 10, 2024

A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

&ŝŐƵƌĞϭϭ

ůĂŝŵŝŶŐŽĨ^ŽĐŝĂů^ĞĐƵƌŝƚLJEŽƚůǁĂLJƐƐƐŽĐŝĂƚĞĚǁŝƚŚ^ƚŽƉƉŝŶŐtŽƌŬ

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KǁŶŝŶĐŽŵĞŝŶĐŝĚĞŶĐĞ;ƉĞƌĐĞŶƚĂŐĞͿ

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EŽƚĞ͗sĂůƵĞƐĂƌĞůĂďĞůĞĚĂƚĂŐĞƐϯϬ͕ϰϲ͕ϲϭ͕ĂŶĚϳϱ͘

^ŽƵƌĐĞ͗ƵƚŚŽƌƐ ƚĂďƵůĂƚŝŽŶŽĨ/Z^ĚĂƚĂ

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ϭϬϬн

A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

&ŝŐƵƌĞϭϮ

DŽƐƚĚƵůƚƐZĞĐĞŝǀĞ>ĂďŽƌн^^нZĞƚŝƌĞ/ŶĐŽŵĞŝƚŚĞƌŝƌĞĐƚůLJŽƌdŚƌŽƵŐŚĂ^ƉŽƵƐĞ

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EŽƚĞ͗sĂůƵĞƐĂƌĞůĂďĞůĞĚĂƚĂŐĞƐϯϬ͕ϰϲ͕ϲϭ͕ĂŶĚϳϱ͘

^ŽƵƌĐĞ͗ƵƚŚŽƌƐ ƚĂďƵůĂƚŝŽŶŽĨ/Z^ĚĂƚĂ

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60

December 10, 2024

A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

&ŝŐƵƌĞϭϯ

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/ŶĐŝĚĞŶĐĞŽĨůĂďŽƌŝŶĐŽŵĞďLJĂŐĞΎĂŶĚŝŶĐŽŵĞǀĞŶƚŝůĞ͕ ϮϬϭϲ;ƉĞƌĐĞŶƚĂŐĞͿ

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KǁŶůĂďŽƌŝŶĐŽŵĞŝŶĐŝĚĞŶĐĞ;ƉĞƌĐĞŶƚĂŐĞͿ

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&ŽƌĂĚĞƐĐƌŝƉƚŝŽŶŽĨƚŚĞŝŶĐŽŵĞǀĞŶƚŝůĞƐ͕ƐĞĞƚŚĞŶŽƚĞŽŶ&ŝŐƵƌĞϲ͘

^ŽƵƌĐĞ͗ƵƚŚŽƌƐ ƚĂďƵůĂƚŝŽŶŽĨ/Z^ĚĂƚĂ

Brady and Bass

61

December 10, 2024

A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

&ŝŐƵƌĞϭϰ

DĞĚŝĂŶ>ĂďŽƌ/ŶĐŽŵĞdLJƉŝĐĂůůLJĞĐůŝŶĞƐǁŝƚŚŐĞĨŽƌdŚŽƐĞtŚŽŽŶƚŝŶƵĞƚŽtŽƌŬ

ŽŶĚŝƚŝŽŶĂůŵĞĚŝĂŶůĂďŽƌŝŶĐŽŵĞďLJĂŐĞΎĂŶĚŝŶĐŽŵĞǀĞŶƚŝůĞ͕ ϮϬϭϲ;ƚŚŽƵƐĂŶĚƐŽĨĚŽůůĂƌƐͿ

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ŽŶĚŝƚŝŽŶĂůŵĞĚŝĂŶƉĞƌĐĂƉŝƚĂůĂďŽƌŝŶĐŽŵĞ;ƚŚŽƵƐĂŶĚƐŽĨĚŽůůĂƌƐͿ

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ĂůůǀĞŶƚŝůĞƐŝŶƚŚĞĂŐĞƌĂŶŐĞ͘

&ŽƌĂĚĞƐĐƌŝƉƚŝŽŶŽĨƚŚĞŝŶĐŽŵĞǀĞŶƚŝůĞƐ͕ƐĞĞƚŚĞŶŽƚĞŽŶ&ŝŐƵƌĞϲ͘

^ŽƵƌĐĞ͗ƵƚŚŽƌƐ ƚĂďƵůĂƚŝŽŶŽĨ/Z^ĚĂƚĂ

Brady and Bass

62

December 10, 2024

A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

&ŝŐƵƌĞϭϱ

,ŝŐŚĞƌͲ/ŶĐŽŵĞdĞŶĚƚŽůĂŝŵ^ŽĐŝĂů^ĞĐƵƌŝƚLJ>ĂƚĞƌ

/ŶĐŝĚĞŶĐĞŽĨ^ŽĐŝĂů^ĞĐƵƌŝƚLJŝŶĐŽŵĞďLJĂŐĞΎĂŶĚŝŶĐŽŵĞǀĞŶƚŝůĞ͕ ϮϬϭϲ;ƉĞƌĐĞŶƚĂŐĞͿ

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ΎĞĐĂƵƐĞŽĨƐĂŵƉůĞƐŝnjĞůŝŵŝƚĂƚŝŽŶƐ͕ƚŚŝƐĐŚĂƌƚƉƌĞƐĞŶƚƐŽǁŶĚĂƚĂĨƌŽŵĂŐĞϰϮƚŽĂŐĞϵϴĂŶĚŽǁŶŽƌƐƉŽƵƐĞĚĂƚĂĨƌŽŵĂŐĞϰϭƚŽĂŐĞϵϴ͘

&ŽƌĂĚĞƐĐƌŝƉƚŝŽŶŽĨƚŚĞŝŶĐŽŵĞǀĞŶƚŝůĞƐ͕ƐĞĞƚŚĞŶŽƚĞŽŶ&ŝŐƵƌĞϲ͘

^ŽƵƌĐĞ͗ƵƚŚŽƌƐ ƚĂďƵůĂƚŝŽŶŽĨ/Z^ĚĂƚĂ

Brady and Bass

63

December 10, 2024

A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

&ŝŐƵƌĞϭϲ

>ŽǁĞƌ/ŶĐŽŵĞDŽƌĞ>ŝŬĞůLJƚŽ,ĂǀĞ^ŽĐŝĂů^ĞĐƵƌŝƚLJĞŶĞĨŝƚƐĂƚzŽƵŶŐĞƌŐĞƐ

^ŽĐŝĂů^ĞĐƵƌŝƚLJŝŶĐŽŵĞŝŶĐŝĚĞŶĐĞďLJŝŶĐŽŵĞǀĞŶƚŝůĞ͕ΎĂŐĞƐϱϵƚŚƌŽƵŐŚϳϮ͕ϮϬϭϲ;ƉĞƌĐĞŶƚĂŐĞͿ

ŐĞϱϵ

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KǁŶ^ŽĐŝĂů^ĞĐƵƌŝƚLJŝŶĐŽŵĞŝŶĐŝĚĞŶĐĞ;ƉĞƌĐĞŶƚĂŐĞͿ

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KǁŶŽƌƐƉŽƵƐĞ^ŽĐŝĂů^ĞĐƵƌŝƚLJŝŶĐŽŵĞŝŶĐŝĚĞŶĐĞ;ƉĞƌĐĞŶƚĂŐĞͿ

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Ύ&ŽƌĂĚĞƐĐƌŝƉƚŝŽŶŽĨƚŚĞŝŶĐŽŵĞǀĞŶƚŝůĞƐ͕ƐĞĞƚŚĞŶŽƚĞŽŶ&ŝŐƵƌĞϲ͘

^ŽƵƌĐĞ͗ƵƚŚŽƌƐ ƚĂďƵůĂƚŝŽŶŽĨ/Z^ĚĂƚĂ

Brady and Bass

64

December 10, 2024

ϮϬ

A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

&ŝŐƵƌĞϭϳ

^ŽĐŝĂů^ĞĐƵƌŝƚLJ/ŶĐŽŵĞ/Ɛ^ƵďƐƚĂŶƚŝĂůĨŽƌKůĚĞƌ/ŶĚŝǀŝĚƵĂůƐ

ŽŶĚŝƚŝŽŶĂůŵĞĚŝĂŶ^ŽĐŝĂů^ĞĐƵƌŝƚLJŝŶĐŽŵĞďLJĂŐĞΎĂŶĚŝŶĐŽŵĞǀĞŶƚŝůĞ͕ ϮϬϭϲ;ƚŚŽƵƐĂŶĚƐŽĨĚŽůůĂƌƐͿ

/ŶĐŽŵĞǀĞŶƚŝůĞ͗

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ŽŶĚŝƚŝŽŶĂůŵĞĚŝĂŶŽǁŶ^ŽĐŝĂů^ĞĐƵƌŝƚLJŝŶĐŽŵĞ;ƚŚŽƵƐĂŶĚƐŽĨĚŽůůĂƌƐͿ

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ΎĞĐĂƵƐĞŽĨƐĂŵƉůĞƐŝnjĞůŝŵŝƚĂƚŝŽŶƐ͕ƚŚŝƐĐŚĂƌƚƉƌĞƐĞŶƚƐŽǁŶĚĂƚĂĨƌŽŵĂŐĞϰϮƚŽĂŐĞϵϴĂŶĚƉĞƌĐĂƉŝƚĂĚĂƚĂĨƌŽŵĂŐĞϰϭƚŽĂŐĞϵϴ͘DĞĚŝĂŶƐĂƌĞŶŽƚĂǀĂŝůĂďůĞĨŽƌ

ĂůůǀĞŶƚŝůĞƐŝŶƚŚĞĂŐĞƌĂŶŐĞ͘

&ŽƌĂĚĞƐĐƌŝƉƚŝŽŶŽĨƚŚĞŝŶĐŽŵĞǀĞŶƚŝůĞƐ͕ƐĞĞƚŚĞŶŽƚĞŽŶ&ŝŐƵƌĞϲ͘

^ŽƵƌĐĞ͗ƵƚŚŽƌƐ ƚĂďƵůĂƚŝŽŶŽĨ/Z^ĚĂƚĂ

Brady and Bass

65

December 10, 2024

A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

&ŝŐƵƌĞϭϴ

ZĞƚŝƌĞŵĞŶƚ/ŶĐŽŵĞ/ŶĐŝĚĞŶĐĞ,ŝŐŚĨŽƌůůďƵƚ>ŽǁĞƐƚ/ŶĐŽŵĞĨƚĞƌŐĞϳϬ

/ŶĐŝĚĞŶĐĞŽĨƌĞƚŝƌĞŵĞŶƚŝŶĐŽŵĞďLJĂŐĞΎĂŶĚŝŶĐŽŵĞǀĞŶƚŝůĞ͕ ϮϬϭϲ;ƉĞƌĐĞŶƚĂŐĞͿ

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KǁŶƌĞƚŝƌĞŵĞŶƚŝŶĐŽŵĞŝŶĐŝĚĞŶĐĞ;ƉĞƌĐĞŶƚĂŐĞͿ

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KǁŶŽƌƐƉŽƵƐĞƌĞƚŝƌĞŵĞŶƚŝŶĐŽŵĞŝŶĐŝĚĞŶĐĞ;ƉĞƌĐĞŶƚĂŐĞͿ

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KǁŶƌĞƚŝƌĞŵĞŶƚŝŶĐŽŵĞŝŶĐŝĚĞŶĐĞ;ƉĞƌĐĞŶƚĂŐĞͿ

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ΎĞĐĂƵƐĞŽĨƐĂŵƉůĞƐŝnjĞůŝŵŝƚĂƚŝŽŶƐ͕ƚŚŝƐĐŚĂƌƚƉƌĞƐĞŶƚƐĚĂƚĂĨƌŽŵĂŐĞϮϬƚŽĂŐĞϵϲ͘

&ŽƌĂĚĞƐĐƌŝƉƚŝŽŶŽĨƚŚĞŝŶĐŽŵĞǀĞŶƚŝůĞƐ͕ƐĞĞƚŚĞŶŽƚĞŽŶ&ŝŐƵƌĞϲ͘

^ŽƵƌĐĞ͗ƵƚŚŽƌƐ ƚĂďƵůĂƚŝŽŶŽĨ/Z^ĚĂƚĂ

Brady and Bass

66

December 10, 2024

A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

&ŝŐƵƌĞϭϵ

zŽƵŶŐĞƌŽŚŽƌƚƐdĞŶĚƚŽ,ĂǀĞDŽƌĞZĞƚŝƌĞŵĞŶƚ/ŶĐŽŵĞ͕ƐƉĞĐŝĂůůLJŵŽŶŐ>ŽǁĞƌͲ/ŶĐŽŵĞ

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ŽŶĚŝƚŝŽŶĂůŵĞĚŝĂŶŽǁŶƌĞƚŝƌĞŵĞŶƚŝŶĐŽŵĞ;ƚŚŽƵƐĂŶĚƐŽĨĚŽůůĂƌƐͿ

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ŽŶĚŝƚŝŽŶĂůŵĞĚŝĂŶƉĞƌĐĂƉŝƚĂƌĞƚŝƌĞŵĞŶƚŝŶĐŽŵĞ;ƚŚŽƵƐĂŶĚƐŽĨĚŽůůĂƌƐͿ

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ŽŶĚŝƚŝŽŶĂůŵĞĚŝĂŶŽǁŶƌĞƚŝƌĞŵĞŶƚŝŶĐŽŵĞ;ƚŚŽƵƐĂŶĚƐŽĨĚŽůůĂƌƐͿ

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ŽŶĚŝƚŝŽŶĂůŵĞĚŝĂŶƉĞƌĐĂƉŝƚĂƌĞƚŝƌĞŵĞŶƚŝŶĐŽŵĞ;ƚŚŽƵƐĂŶĚƐŽĨĚŽůůĂƌƐͿ

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ΎĞĐĂƵƐĞŽĨƐĂŵƉůĞƐŝnjĞůŝŵŝƚĂƚŝŽŶƐ͕ƚŚŝƐĐŚĂƌƚƉƌĞƐĞŶƚƐĚĂƚĂĨƌŽŵĂŐĞϮϬƚŽĂŐĞϵϲ͘DĞĚŝĂŶƐĂƌĞŶŽƚĂǀĂŝůĂďůĞĨŽƌĂůůǀĞŶƚŝůĞƐŝŶƚŚĞĂŐĞƌĂŶŐĞ͘

&ŽƌĂĚĞƐĐƌŝƉƚŝŽŶŽĨƚŚĞŝŶĐŽŵĞǀĞŶƚŝůĞƐ͕ƐĞĞƚŚĞŶŽƚĞŽŶ&ŝŐƵƌĞϲ͘

^ŽƵƌĐĞ͗ƵƚŚŽƌƐ ƚĂďƵůĂƚŝŽŶŽĨ/Z^ĚĂƚĂ

Brady and Bass

67

December 10, 2024

A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

&ŝŐƵƌĞϮϬ

/ŵƉŽƌƚĂŶĐĞŽĨEŽŶ ^ŽĐŝĂů^ĞĐƵƌŝƚLJZĞƚŝƌĞŵĞŶƚ/ŶĐŽŵĞ/ŶĐƌĞĂƐĞƐǁŝƚŚdŽƚĂů/ŶĐŽŵĞZĂŶŬ

KǁŶŽƌƐƉŽƵƐĞŝŶĐŝĚĞŶĐĞĂŶĚƉĞƌĐĂƉŝƚĂĐŽŶĚŝƚŝŽŶĂůŵĞĚŝĂŶŝŶĐŽŵĞĂƚĂŐĞϳϮďLJŝŶĐŽŵĞǀĞŶƚŝůĞ͕ΎϮϬϭϲ

^ŽĐŝĂů^ĞĐƵƌŝƚLJ

ZĞƚŝƌĞŵĞŶƚ

KǁŶŽƌƐƉŽƵƐĞŝŶĐŝĚĞŶĐĞ;ƉĞƌĐĞŶƚĂŐĞͿ

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ŽŶĚŝƚŝŽŶĂůŵĞĚŝĂŶƉĞƌĐĂƉŝƚĂŝŶĐŽŵĞ;ƚŚŽƵƐĂŶĚƐŽĨĚŽůůĂƌƐͿ

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Ύ&ŽƌĂĚĞƐĐƌŝƉƚŝŽŶŽĨƚŚĞŝŶĐŽŵĞǀĞŶƚŝůĞƐ͕ƐĞĞƚŚĞŶŽƚĞŽŶ&ŝŐƵƌĞϲ͘

^ŽƵƌĐĞ͗ƵƚŚŽƌƐ ƚĂďƵůĂƚŝŽŶŽĨ/Z^ĚĂƚĂ

Brady and Bass

68

December 10, 2024

A Day in the Life Cycle: Using Tax Data to Measure Changes in Income by Age

&ŝŐƵƌĞϮϭ

dŚŽƐĞǁŝƚŚ>ŽǁĞƌdŽƚĂů/ŶĐŽŵĞ>ĞƐƐ>ŝŬĞůLJƚŽ,ĂǀĞ>ĂďŽƌн^^нZĞƚŝƌĞ/ŶĐŽŵĞƵƌŝŶŐWƌŝŵĞtŽƌŬŝŶŐzĞĂƌƐ

/ŶĐŝĚĞŶĐĞŽĨ>ĂďŽƌн^^нZĞƚŝƌĞŝŶĐŽŵĞďLJĂŐĞΎĂŶĚŝŶĐŽŵĞǀĞŶƚŝůĞ͕ ϮϬϭϲ;ƉĞƌĐĞŶƚĂŐĞͿ

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KǁŶ>ĂďŽƌн^^нZĞƚŝƌĞŝŶĐŽŵĞŝŶĐŝĚĞŶĐĞ;ƉĞƌĐĞŶƚĂŐĞͿ

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KǁŶŽƌƐƉŽƵƐĞ>ĂďŽƌн^^нZĞƚŝƌĞŝŶĐŽŵĞŝŶĐŝĚĞŶĐĞ;ƉĞƌĐĞŶƚĂŐĞͿ

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ΎĞĐĂƵƐĞŽĨƐĂŵƉůĞƐŝnjĞůŝŵŝƚĂƚŝŽŶƐ͕ƚŚŝƐĐŚĂƌƚƉƌĞƐĞŶƚƐĚĂƚĂĨƌŽŵĂŐĞϮϬƚŽĂŐĞϵϴ͘

&ŽƌĂĚĞƐĐƌŝƉƚŝŽŶŽĨƚŚĞŝŶĐŽŵ

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