3.2 Income
Total household income was estimated by summing the before tax income of the respondent and the combined income of all other members of the household over the previous 12 months.[8] The results are summarised by age range in Table 3-2, and by working status in Table 3-3. As the distributions of both income and wealth are typically highly skewed owing to a few high income or wealth individuals, the tables present both means and medians. Again, a similar procedure was used for imputation to expand the usable sample size to 5,054 where variables in the imputation model were present. In this case the means, medians and inter-quartile ranges for the original and expanded samples are strikingly close, in part owing to a smaller number of missing values.
| Age range | Recorded income ($) | Including imputed income ($) | ||||
|---|---|---|---|---|---|---|
| 4,311 observations | 5,054 observations | |||||
| Mean | Median | IQR | Mean | Median | IQR | |
| 55-59 | 114,000 | 85,000 | 90,000 | 114,000 | 90,000 | 87,000 |
| 60-64 | 109,000 | 63,300 | 75,000 | 107,000 | 65,000 | 80,000 |
| 65-70 | 59,000 | 40,500 | 48,000 | 58,000 | 41,000 | 50,000 |
| Total | 99,000 | 66,500 | 82,000 | 97,000 | 69,000 | 84,000 |
| Sample size | Mean | Median | |
|---|---|---|---|
| Working | |||
| Wealth ($'000) | 3,744 | 676 | 406 |
| Income ($) | 3,738 | 114,000 | 84,000 |
| Retired | |||
| Wealth ($'000) | 1,349 | 427 | 294 |
| Income ($) | 1,316 | 49,000 | 36,000 |
The ratio of mean wealth to mean income rises almost 50% from around six times for those working to nine times for those who are retired. This is consistent with the widely recognised phenomenon “of asset rich but cash poor” that characterises many retired individuals. Income drops significantly with retirement, and while assets are run down (the “dissaving” phase of the life cycle), the decline is much less marked. This is accentuated by the fact that the principal residence is a major share of total assets and owner occupied rates remain high for many retirees in New Zealand.
The HWR survey also asked respondents for the sources of income. The categories were wages and salaries paid by an employer; self-employment; income from investments (interest, dividends, rent); regular payments from the Accident Compensation Corporation (ACC); New Zealand Superannuation (NZS) or veterans' and war pensions (VP); other superannuation; unemployment benefits (UB); domestic purposes benefit (DPB); invalids' benefit (IB); student allowance; other benefits and other sources; and an option to record no source of income in the preceding 12 months. Respondents could indicate more than one source so the totals can exceed 100%. The results are depicted in Figure 2 (Panel a).
The majority of the working group received income from wages and salaries, while amongst retirees investment income and NZS were the most common sources. Very few of the retired group reported self-employment income. The average household income for the working group was found to be $114,000, while for the retired group the average income was $49,000. As this latter estimate is more than double the married allowance under NZS, it is apparent that investment income is an important source for many retirees.
Panel b of Figure 2 summarises the assessments of respondents in relation to the adequacy of their incomes. In large measure the results for both the working and retired groups are similar, with around 80% perceiving their current incomes to be adequate. The proportion of retired respondents who felt their income was not enough (about 10%) is comparable to the proportions reported by Fergusson et al (2001: Table 9) who found 12% of singles and 10% of older couples felt their income was not enough.
- Figure 2: Income: sources and adequacy
- Source: Health, Work and Retirement Survey
Notes
- [8]An alternative to the observed household income is the use of an equivalised income which adjusts for the age composition of the household members. As the observations in this study are from individuals aged 55 to 70 this adjustment was not felt necessary.
