Measuring Household Wealth in the Panel Study of Income Dynamics: The Role of Retirement Assets

While the Panel Study of Income Dynamics (PSID) has much to offer researchers studying household behavior, one limitation is that its summary measure of wealth is not as broad as those of other commonly used surveys, such as the Survey of Consumer Finances (SCF), because it does not include the value of defined-contribution (DC) pensions. This paper describes the pension data available in the PSID and shows how they can be used to create a more comprehensive picture of household finances. We then compare various measures derived from these data with their counterparts from the SCF. Along a number of dimensions, the PSID data line up fairly well. Notably, an augmented summary measure of PSID wealth that includes the value of DC pensions is considerably closer to the SCF summary measure than to the standard measure for the median household. We conclude by presenting several examples of research areas where using a broader measure of wealth might be important.