Measuring Household Wealth in the Panel Study of Income Dynamics: The Role of Retirement Assets
The two primary data sets that researchers use to analyze household-level wealth in the United States are the Panel Study of Income Dynamics (PSID) and the Survey of Consumer Finances (SCF). The SCF generally offers only cross-sectional data; the PSID, while it does not track the upper end of the wealth and income distribution, as the SCF does, complements the SCF by including longitudinal data, enabling researchers to examine the evolution over time of wealth and financial well-being at the household level. The PSID also provides more comprehensive expenditure data, making the PSID a better source for studying the relationship between household wealth and consumption.
Earlier studies concluding that the PSID wealth data track SCF wealth data well for households other than those at the very top of the distribution subtract the value of assets held in employer-provided defined-contribution (DC) retirement accounts, such as 401(k)s, from the SCF summary measure of net worth, because the PSID summary wealth measure does not include the value of DC assets. But the share of assets held in DC retirement accounts has become considerable for many households, so their exclusion is an important issue. As the authors of this paper note, substantial information about assets held through DC accounts is collected in the “pension module” of the PSID, and researchers can use this information to calculate a more comprehensive measure of wealth for PSID households.