Not just borrowing against the value, the Personal Income metric "does not include realized or unrealized capital gains or losses." So even if you sell stocks or a house or something and make money on it, that income isn't part of your Personal Income. If you're retired and pulling money out of your 401k that has been growing in value for 30 years, I think that also wouldn't be part of Personal Income and spending that money would be "dissaving" from the perspective of this post.
Most people have retirement accounts that defer income tax, like 401k and IRA, and therefore withdrawals are categorized as ordinary income for taxation purposes, not capital gains. I would not expect the average retiree to have much or any capital gains.
Personal income as defined by BEA differs substantially from adjusted gross income (AGI), the principal income measure used by the Internal Revenue Service.
So it explicitly is not the same as the IRS definition of income.
For the measurement of personal income, employer contributions to pension plans are counted as part of supplements to wages and salaries. Employee contributions to the plans, capital gains of the plans, and payments of benefits by the plans are not counted as part of personal income.
I believe they consider a 401k to be a defined contribution pension plan. I know normally you wouldn't call a 401k a pension and you wouldn't talk about "payments of benefits" from a 401k, but in context (page 32) I think that is what they mean. So it seems like the amount your employer contributes to your 401k counts as income for that year, any additional voluntary amount you contribute doesn't count, and when you withdraw money that also doesn't count. Maybe I'm misunderstanding but that is my reading.
Good point. Much of the dissaving is by the bottom 20%, which probably consists of many retirees with low incomes who are spending down their accumulated assets.
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True! People who just keep borrowing against the value of their stocks. Never paying income tax. And their stocks keep growing.
Not just borrowing against the value, the Personal Income metric "does not include realized or unrealized capital gains or losses." So even if you sell stocks or a house or something and make money on it, that income isn't part of your Personal Income. If you're retired and pulling money out of your 401k that has been growing in value for 30 years, I think that also wouldn't be part of Personal Income and spending that money would be "dissaving" from the perspective of this post.
Most people have retirement accounts that defer income tax, like 401k and IRA, and therefore withdrawals are categorized as ordinary income for taxation purposes, not capital gains. I would not expect the average retiree to have much or any capital gains.
You are right for tax purposes, but for this Personal Income metric I'm not sure. Looking at this: https://www.bea.gov/system/files/methodologies/SPI-Methodolo...
So it explicitly is not the same as the IRS definition of income.
I believe they consider a 401k to be a defined contribution pension plan. I know normally you wouldn't call a 401k a pension and you wouldn't talk about "payments of benefits" from a 401k, but in context (page 32) I think that is what they mean. So it seems like the amount your employer contributes to your 401k counts as income for that year, any additional voluntary amount you contribute doesn't count, and when you withdraw money that also doesn't count. Maybe I'm misunderstanding but that is my reading.
Income tax is a non-issue for the issues covered in this post, except that they are one of multiple things that draw down household assets.
Good point. Much of the dissaving is by the bottom 20%, which probably consists of many retirees with low incomes who are spending down their accumulated assets.