Cross National Comparison of Income
and Wealth Status in Retirement:
First Results from the Luxembourg Wealth
Study (LWS)
Eva Sierminska
Luxembourg Wealth Study
Andrea Brandolini
Bank of Italy
Timothy M. Smeeding
Syracuse University and Luxembourg Income Study
Prepared for the 8th Annual Joint Conference of the Retirement
Research Consortium “Pathways to a Secure Retirement”
August 10-11, 2006
Washington, DC
I.
Introduction
A. First Look at Results from a New
Project: LWS
B. Technical Details at:
http:www.lisproject.org/lws.htm
(and especially, Sierminska et al,
2006; August 7, 2006 “IARIW”
paper
C. Rest of Presentation
II.
Older Persons in Comparative
Perspective
A. Income and Wealth
B. Limits for this Paper
C. Research and Policy Questions
Addressed Below
D. The Literature on Wealth and Low
Income in Comparative Perspective
III.
Data, Variables, Methods and
Measurement Issues
A. The LWS Data Sets
B. Income and Wealth Definitions
C. Principal Omissions: Pensions (Still
in Accrual) and Business Wealth
Income and Wealth Definitions
A. Income Components
Earnings: Wages and Salaries, Self Employment Income
Capital Income: Interest and Dividends, Rental Income, Income from Savings Plans
Private Transfers: Occupational and Other Pensions; Interhousehold Transfers
Public Transfers: Social Incurance and Social Assistance
See Methodological Notes for more.
Income and Wealth Definitions
B. Wealth Components
Financial Assets
Deposit Accounts
Stocks
Mutual Funds
Bonds
Non-financial assets
Principal Residence
Other Real Estate
Minus Total Debt
(including home secured debt)
Equals Net Worth
See Methodological Notes for more.
III.
Data, Variables, Methods and
Measurement Issues (con’t)
D. ‘Elderly’ Sample (Table A-1)
E. Adjustments for Household Size
F. Measures of Income Poverty and
Wealth Poverty
Table A-1. Household Composition
(percentage of households)
71
Sweden
81
United
Kingdom
78
21
29
19
22
6
7
5
8
7
7
7
10
9
10
9
1
2
1
1
3
0
3
1
1
1
2
7
1
2
Minus Other Units with Persons 65+
not Head or Spouse
(2)
(5)
(3)
(1)
(5)
(0)
(1)
Household Units with Head or
Spouse 65+ (examined here)
14
14
15
20
24
19
21
Household composition
Households with no Elderly
All Households with Elderly
of which:
Single Age 65+ only
(examined here)
Couple head or spouse 65+
only
Single with others: head 65+
Couple 65+ Head or Spouse
with others
United States
(SCF )
84
Canada
81
Finland
82
Germany
79
16
19
18
4
4
8
Source: Authors' calculations from the Luxembourg Wealth Study.
Italy
IV. Results in Brief
A. Openers: Asset Participation and
Composition (Table 1)
B. Magnitudes: Medians for Income
and Net Worth (Table 2)
C. Composition: Income and Wealth
Packages (Table 3)

Note the difference between means
and medians
Table 1. Asset Participation and Portfolio Composition in Households with
Elderly Persons as Head or Spouse1
A. Asset Participation
United
States
Canada
Finland
Germany
95
93
91
62
95
23
21
17
93
10
14
17
89
33
3
4
Non-financial assets
84
76
Principal residence5
Other Real Estate
83
24
Total debt
of which:
Home secured debt
Wealth components
Financial assets
Deposit accounts
Stocks
Mutual funds
Bonds
United
Kingdom
Italy
Sweden
75
86
82
n.a.
n.a.
n.a.
n.a.
75
7
9
16
74
41
59
28
77
n.a.
n.a.
n.a.
81
55
78
64
70
74
20
77
33
52
15
77
22
58
18
69
6
49
32
14
13
9
39
21
27
15
5
10
3
n.a.
2
4
3
8
Source: Authors' calculations from the Luxembourg Wealth Study, Beta-version (June 29th, 2006); see
also methodolgical notes.
Notes: 1 Elderly are those where head or spouse are 65+ years of age.
2
Germany records liquid assets only when they exceed 2,500 per year. There is no further breakdown by
type.
3
Only savings or deposit accounts are separately identified in the UK.
4
In Sweden, home secured debt (is not separated from other loans).
5
The self-assessed current value of the home is reported except for Sweden, where the tax value is
reported inflated by a regional constant.
Table 1. Asset Participation and Portfolio Composition in Households with
1
Elderly Persons as Head or Spouse
B. Portfolio Composition for Aggregate Wealth
United
States
Canada
Finland
Germany
44
33
17
14
12
18
9
4
17
8
6
3
11
5
0
1
Non-financial assets
56
67
Principal residence5
Real estates
35
21
Wealth components
Financial assets
Deposit accounts
Stocks
Mutual funds
Bonds
Total assets
Total debt
of which:
Home secured debt
Total net worth
United
Kingdom
Italy
Sweden
17
41
26
n.a.
n.a.
n.a.
n.a.
10
1
3
3
17
8
13
3
13
n.a.
n.a.
n.a.
83
86
83
59
74
55
12
59
23
65
20
65
18
57
12
69
5
100
100
100
100
100
100
100
6
5
1
6
1
11
2
5
4
1
4
0
n.a.
94
95
99
94
99
89
2
4
3
1
98
Source: Authors' calculations from the Luxembourg Wealth Study, Beta-version (June 29th, 2006); see
also methodolgical notes.
Notes: 1 Elderly are those where head or spouse are 65+ years of age.
2
Germany records liquid assets only when they exceed 2,500 per year. There is no further breakdown by
type.
3
Only savings or deposit accounts are separately identified in the UK.
4
In Sweden, home secured debt (is not separated from other loans).
5
The self-assessed current value of the home is reported except for Sweden, where the tax value is
reported inflated by a regional constant.
Table 2. Median Income and Net Worth in Households Containing Elderly Persons vs. All
A. Median Income Measures of Well-Being Across Countries
Country
United States (SCF)
Canada
Finland
Germany
Italy
Sweden
United Kingdom
(yr)
(00)
(98)
(98)
(01)
(01)
(02)
(00)
Median
Equivalized DPI as
a Percentage of
Median DPI of All
Households
All Households
with an
Elderly Person
as Head/Spouse
93
92
79
90
88
78
80
Median Equivalized DPI in US 2002
Dollars
All Households
with an
Elderly Person
All
as Head/Spouse
Households
20,043
(123)
21,637 (114)
19,231
(118)
20,957 (110)
13,287
(81)
16,908
(89)
16,886
(103)
18,779
(99)
13,847
(85)
15,753
(83)
14,834
(91)
18,935
(99)
16,369
(100)
20,458 (107)
Simple Average
86
16,357
(100)
Source: Authors' calculations from the Luxembourg Wealth Study.
19,061
(100)
Table 2. Median Income and Net Worth in Households Containing Elderly Persons vs. All
B. Net Worth Measures of Well-Being Across Countries
Country
United States (SCF)
Canada
Finland
Germany
Italy
Sweden
United Kingdom
(yr)
(01)
(99)
(98)
(02)
(02)
(02)
(00)
Median
Equivalized Net
Worth as a
Percentage of
Median Net Worth
of All Households
All Households
with an
Elderly Person
as Head/Spouse
452
250
156
307
106
285
193
Median Equivalized Net Worth:
2002 PPP Dollar Value and Relative to
Average Value for Sample
All Households
with an
Elderly Person
as Head/Spouse
All Households
$104,528
(142)
$25,215
(70)
61,313
(83)
24,525
(68)
56,033
(76)
35,903 (100)
71,585
(97)
23,343
(65)
81,281
(110)
76,418 (213)
47,591
(65)
16,715
(47)
94,014
(127)
48,723 (136)
Simple Average
250
$73,764
(100)
Source: Authors' calculations from the Luxembourg Wealth Study.
$35,834
(100)
Table 3. Older Person's Income and Wealth Components:
All Households with Elderly Persons as Head/Spouse
Panel A. Income Packages (ratio of means)1
All Households
United States
(SCF)
Canada
Finland
Earnings
34
34
9
Capital Income
23
9
15
Private Transfers
17
22
57
Public Social Assistance
27
35
19
TOTAL
100
100
100
Source: Authors' calculations from the Luxembourg Wealth Study.
Germany
16
10
5
69
100
Italy2
26
6
12
56
100
Sweden
11
10
14
65
100
United
Kingdom
18
12
24
46
100
Notes:
Earnings include both wages and salaries and income from self-employment activities. Capital income includes
interests and dividends, rental income, income from savings plans (including annuities from life insurance and private
pensions), royalties and other property income. Private transfers include occupational and other pensions (e.g., pensions
of unknown type or foreign pensions), alimony, regular transfers from other households/charity/private institutions, and
other incomes not elsewhere classifiable. Public transfers include social insurance (including some universal benefits
such as demo-grant pensions and family allowances) as well as public social assistance, which includes means-tested
cash and near-cash public income transfers.
2
Italy is net of taxes.
1
Table 3. Older Person's Income and Wealth Components:
All Households with Elderly Persons as Head/Spouse
Panel B. Wealth Packages (ratio of overall means)3
All Households
Financial Assets4
Principal Residence
Investment Real Estate
Total Assets
(Debt)
(Net Worth)
United States
(SCF)
44
35
21
100
6
94
Canada
30
58
12
100
10
90
Finland
17
59
23
100
1
99
Germany
14
66
20
100
6
94
Italy
17
65
18
100
1
99
Sweden
41
47
12
100
11
89
United
Kingdom
26
69
5
100
2
98
Sweden
51
41
8
100
11
89
United
Kingdom
26
73
1
100
6
94
Panel C. Wealth Packages for median household (ratio of means in middle of distribution)5
All Households
United States
(SCF)
Canada
Finland
Germany
4
Financial Assets
24
18
12
53
Principal Residence
70
76
82
44
Investment Real Estate
6
6
7
4
Total Assets
100
100
100
100
(Debt)
12
20
2
5
(Net Worth)
88
80
98
95
Source: Authors' calculations from the Luxembourg Wealth Study.
Italy
10
84
6
100
2
98
Notes:
Ratio of means is the ratio of the respective population means for each item.
3
4
Financial assets include deposit accounts, stocks, bonds, and mutual funds. Non-financial assets include (owned)
principal residence and investment real estate. Finally, total debt refers to all outstanding loans, both home-secured and
non-home secured.
5
Median household is defined as having equivalized total assets between 40 to 60 percent of the distribution of all
households. The ratio of means is the ratio of the respective means of the median household.
IV. Results in Brief (con’t)
D. Home Ownership and Home Value
for All Elders, and for Low Income
Units (Table 4)
E. Financial Assets for All and for Low
Income Units (Table 5)
Table 4. Homeownership and Home Values
A. Owners in Households Containing Elderly Persons
Country
United States (SCF)
Canada
Finland
Germany
Italy
Sweden
United Kingdom
All Households with an Elderly Person as Head/Spouse
Percent
For Owners:
Median Value
Owners Median Value
Home Equity
Percent
Who Own Home Equity
(equivalized) (unequivalized)
Homeowners Outright
83.3
72.0
88,365
111,727
74.0
74.4
61,936
96,349
77.3
93.4
52,031
66,036
53.6
84.9
155,620
205,171
75.8
95.6
84,870
124,270
58.4
na
44,210
56,929
69.0
88.7
114,594
147,328
Source: Authors' calculations from the Luxembourg Wealth Study.
Notes:
1
DPI is the sum of total revenues from earnings, capital income, private transfers,
public social insurance and public social assistance -- net of taxes and social security
contributions. Incomes were bottom-coded at 1% of the mean equivalized DPI and topcoded at 10 times the median unequivalized.
2
Net worth consists of financial assets and non-financial assets -- net of total debt. No
bottom- or top-coding were applied.
3
Both income and wealth are equivalized; adjusted = unadjusted / square root of
household size.
4
All observations with missing or zero disposable income or missing net worth were
dropped from the sample.
Table 4. Homeownership and Home Values
B. Owners in Income Poor Households Containing Elderly Persons
Country
United States (SCF)
Canada
Finland
Germany
Italy
Sweden
United Kingdom
All Households with an Elderly Person as Head/Spouse
Percent
For Owners:
Median
Value
Median Value
Owners
Home Equity
Percent
Who Own Home Equity
(equivalized) (unequivalized)
Homeowners Outright
67.5
77.3
53,866
71,099
52.3
73.2
37,226
49,050
83.2
100.0
46,585
47,168
46.8
91.2
116,715
165,060
70.4
99.5
46,636
62,197
44.3
100.0
38,993
44,880
68.6
90.0
101,288
119,704
Source: Authors' calculations from the Luxembourg Wealth Study.
Notes:
DPI is the sum of total revenues from earnings, capital income, private transfers,
public social insurance and public social assistance -- net of taxes and social security
contributions. Incomes were bottom-coded at 1% of the mean equivalized DPI and topcoded at 10 times the median unequivalized.
2
Net worth consists of financial assets and non-financial assets -- net of total debt. No
bottom- or top-coding were applied.
1
3
Both income and wealth are equivalized; adjusted = unadjusted / square root of
household size.
4
All observations with missing or zero disposable income or missing net worth were
dropped from the sample.
Table 5. Financial Asset Holdings1 for the Elderly and for All Households
A. All Households Containing Elderly Person as Head or Spouse and
Households of All Ages
Country
United States (SCF)
Canada
Finland
Germany
Italy
Sweden
United Kingdom
All Households with an
Elderly Person as
Head/Spouse
Percent
Median
with
Median Value
Financial Value
for All
Assets ($ 2002) ($ 2002)
94.9 22,336 16,678
90.3
6,255
5,110
91.1
4,686
3,694
61.8 22,008
6,239
75.3
8,968
5,022
85.7 21,061 15,702
82.4 14,975
9,506
Households of
All Ages
Median
Median Value
Value
for All
($ 2002) ($ 2002)
4398
3,321
2,168
1,548
2,723
2,316
14,096
0
7,143
5,022
6943
4,209
5954
3,131
Source: Authors' calculations from the Luxembourg Wealth Study.
Notes: 1All values for financial wealth are equivalized using the square root (E=.5)
equivalence scale.
2
The income poverty rate is defined as the percentage of persons living in
households whose adjusted DPI is lower than 50% of the median DPI.
Table 5. Financial Asset Holdings1 for the Elderly and for All Households
B. Income Poor Households Containing Elderly Persons as Head or Spouse2
and Households of All Ages
Country
United States (SCF)
Canada
Finland
Germany
Italy
Sweden
United Kingdom
All Households with an
Elderly Person as
Head/Spouse
Percent
Median
with
Median Value
Financial Value
for All
Assets ($ 2002) ($ 2002)
83.6
2,285
1,239
76.0
1,517
540
89.9
3,019
2,830
28.7 11,004
0
33.0
3,954
0
77.5 18,081 11,714
65.7
5,525
1,551
Households of
All Ages
Median
Value
Median for All
($ 2002) ($ 2002)
396
124
310
114
585
453
6,353
0
2,779
0
4,453
528
2,653
68
Source: Authors' calculations from the Luxembourg Wealth Study.
Notes: 1All values for financial wealth are equivalized using the square root (E=.5)
equivalence scale.
2
The income poverty rate is defined as the percentage of persons living in
households whose adjusted DPI is lower than 50% of the median DPI.
IV. Results in Brief (con’t)
F. Income and Asset Poverty (Figure 1)
G. Home Ownership amongst the Income
and Asset Poor (Table X)
H. Net Worth and Education (Figures 2, 3)
I. Income and Net Worth Inequality:
Median Net Worth by Income Quartile
(Figure 4)
J. Joint Distributions: Income Quartile
Position of Various Wealth Quartile
Members (Figure 5)
Figure 1. Older Persons' Income and Asset Poverty
100%
90%
80%
44.7
48.4
Percent Poor1
70%
52.3
56.3
54.3
54.5
65.4
60%
50%
40%
30%
20%
10%
20.5
49.2
46.4
36.8
30.5
33.9
27.4
7.8
1.3
15.4
0%
United States
United
States
3.9
3.9
Canada
Finland
2
Income and Asset Poor
1.9
2.5
2.2
5.3
8.3
9.8
4.6
Germany
Italy
Sweden
Income Poor Only
3
4
Asset Poor Only
2.7
Neither
9.6
United
Kingdom
5
Source: Authors' calculations from the Luxembourg Wealth Study.
Notes: 1Percent of all persons living in units containing an elderly person who are poor. Totals may not add to 100 due to rounding.
2
Income and asset poor are the fraction meeting both income and wealth povery criteria.
3
Income poor are those with disposable incomes less than 50 percent of overal median disposable income.
4
Asset poor are those with financial assets less than 25 percent of median financial assets.
5
Neither are the fraction who are neither income nor asset poor.
Table X. Homeownership of the Income and Asset Poor
Country
United States (SCF)
Canada
Finland
Germany
Italy
Sweden
United Kingdom
All Poor Households with an
Elderly Person as
Head/Spouse
59.5
45.1
73.7 1
44.6
69.1
41.6
61.8
(Only Poor
Single Elderly
Persons)
(43.3)
(18.6)
(73.7) 1
(28.9)
(63.0)
(42.9)
(53.0)
Source: Authors' calculations from the Luxembourg Wealth Study.
Notes: 1 The income and asset poor are less than 30 observations.
Figure 2. Net Worth, Financial Assets and Education
A. Median Net Worth by Education Level of Head of Household for Older Households
300,000
250,000
200,000
150,000
100,000
50,000
low
United States (SCF)
Germany
United Kingdom
medium
Canada
Italy
Source: Authors' calculations from the Luxembourg Wealth Study.
high
Finland
Sweden
Figure 2. Net Worth, Financial Assets and Education
500,000
B. Median
- Financial Assets by Education Level of Head of Household for Older Households
80,000
70,000
low
United States (SCF)
Germany
United Kingdom
Canada
Italy
medium
Finland
Sweden
high
60,000
50,000
40,000
30,000
20,000
10,000
low
United States (SCF)
Germany
United Kingdom
medium
Canada
Italy
Source: Authors' calculations from the Luxembourg Wealth Study.
high
Finland
Sweden
Figure 3. Homeownership, Home Values, and Education
A. Homeownership by Education Level of Head of Household for Older Households
100
90
80
70
60
50
40
30
20
10
0
low
United States
Italy
medium
Canada
Sweden
Finland
United Kingdom
500,000
Source:
Authors'
calculations from the Luxembourg Wealth Study.
-
high
Germany
Figure 3. Homeownership, Home Values, and Education
B. 100
Median
Housing Equity for Homeowners by Education Level of Head of Household for Older
0
Households
low
United States
250,000
Italy
Canada
Sweden
medium
Finland
United Kingdom
high
Germany
200,000
150,000
100,000
50,000
low
United States
Italy
medium
Canada
Sweden
Finland
United Kingdom
Source: Authors' calculations from the Luxembourg Wealth Study.
high
Germany
Figure 4. New Worth Medians by Quartiles of DPI
(in thousands, 2002 USD)
350.0
300.0
,000 $
250.0
200.0
150.0
100.0
50.0
0.0
1
2
3
4
DPI quartiles
United States (SCF)
Canada
Source: Authors' calculations from the Luxembourg Wealth Study.
Finland
Germany
Italy
Sweden
United Kingdom
Figure 5. The Income Quartile Position
with Top, Bottom and Middle Wealth Quartiles
A. Top Net Worth Quartile Distribution by DPI Quartiles
85
75
65
55
%
45
35
25
15
5
-5
1
2
3
4
DPI Quartiles
Canada
Italy
Finland
Sweden
%%
United States (SCF)
Germany
United Kingdom
85
Source:-15
Authors'
calculations from the Luxembourg Wealth Study.
Note: All values of income and wealth are equivalized.
1
2
DPI Quartiles
3
4
Figure 5. The Income Quartile Position
with Top, Bottom and Middle Wealth Quartiles
%
85Net Worth Quartile Distribution by DPI Quartiles
B. Bottom
-15
1
2
85
3
4
3
4
DPI Quartiles
75
65
55
%
45
35
25
15
5
-5
1
2
DPI Quartiles
United States (SCF)
Germany
United Kingdom
Canada
Italy
Source: Authors' calculations from the Luxembourg Wealth Study.
Note: All values of income and wealth are equivalized.
Finland
Sweden
Figure 5. The Income Quartile Position
with Top, Bottom and Middle Wealth Quartiles
%
85Two Net Worth Quartile Distribution by DPI Quartiles
C. Middle
-15
85
1
2
3
4
3
4
DPI Quartiles
75
65
55
%
45
35
25
15
5
-5
1
2
DPI Quartiles
United States (SCF)
Germany
United Kingdom
Canada
Italy
Source: Authors' calculations from the Luxembourg Wealth Study.
Note: All values of income and wealth are equivalized.
Finland
Sweden
V.
Discussion
A. First Look: Signal vs. Noise
B. Research Implications: Next Steps
C. Policy Relevance: Public and
Private Sources of Security in Old
Age
D. Bottom Lines:
1. Safety Nets
2. Home Ownership and Value
E. Tip of the Iceberg: Shades of 1985
and LIS