Published in Woonsocket Call on October 13, 2019

The Washington, DC-based National Institute on Retirement Security’s (NIRS) newly released issue brief, Financial Asset Inequity and its Implications for Retirement Security, should send a troubling message to Congress and aging advocacy groups. That is wealth inequality combined with inadequate retirement savings pose a financial threat to working Americans when they retire.

According to the authors, Tyler Bond, NIRS’s Manager of Research with the Institute on Retirement Security and Nari Rhee, PhD, Director of the Retirement Security Program at the UC Berkeley Center for Labor Research and Education, the nation is now facing a retirement savings crisis, that will stretch across generations. “Many working Americans have no retirement savings and even among those who are saving, most are not saving enough to maintain their current standard of living in retirement,” the authors warn.

Bond and Rhee note that many studies looking at retirement savings have examined the lack of savings among working Americans. But they suggest another way to view this retirement policy issue is to consider who does own financial assets, which include assets for retirement.

The expanding wealth chasm is putting retirement even further out of reach for working Americans,” said Bond. “Fewer and fewer workers are offered pensions, which means they must amass enough financial assets on their own to last through retirement. But our research shows this just isn’t happening,” he says.

“Instead, financial assets increasingly are concentrated among the wealthiest Americans, and there is a growing inequality in access to employer-sponsored plans that serve as a vital pillar of our retirement infrastructure. Unless something changes, retirement will become a luxury, and many Americans will miss out on this aspect of the American Dream,” says Bond.

“There’s strong evidence that financial asset inequality will continue to grow worse in the coming decades,” said Rhee. “Financial asset concentration among the wealthiest Gen X households is growing at least as fast as it did among Baby Boomers. And Millennials seem to have achieved comparable degree of financial asset concentration at much younger ages than GenXers and Baby Boomers,” she explained.
The researcher’s note that a 2018 NIRS report found deeply inadequate retirement savings levels among working age Americans. More specifically, an analysis of U.S. Census Bureau data reveal that the median retirement account balance among all working individuals is $0.00, and 57 percent of working age individuals do not own any retirement account assets in an employer-sponsored 401(k)-type plan, individual account or pension.

Financially Surviving Your Retirement Years

The new 14-page NIRS analysis, released on September 25, indicates that financial asset inequity has increased significantly among Baby Boomers since 2004.

The analysis’s findings indicate that the share of Baby Boomer financial assets owned by the wealthiest 5 percent of households in this generation grew from 52 percent in 2004 to 60 percent in 2016. When examining the same period of time, the researchers found the share of financial assets owned by the top 10 percent of Baby Boomer households grew from 68 percent to 75 percent, and the share owned by the top 25 percent grew from 86 percent to 91 percent.

Also, the share of assets owned by the bottom 50 percent of Baby Boomer households shrank from 3 percent in 2004 to under 2 percent in 2016

The researchers also found that among GenX households, the wealthiest top 25 percent owned 87 percent of financial assets in 2016. Millennials in 2016 reached a comparable degree of financial asset concentration, with 85 percent of financial assets owned by the wealthiest 25 percent.
The analysis concludes that the root of financial asset inequality is worsened by regressive tax incentives for retirement savings and unequal access to employer-provided retirement plans.

Bond and Rhee suggest that federal and state policies can help improve retirement security of retirees. The authors call for strengthening and expanding Social Security and the supporting of state efforts to establish state-facilitated retirement savings plans to enable asset building among the roughly half of the nation’s private sector workers who lack access to a workplace retirement plan. They also support promoting and improving the federal Saver’s Credit to help build the retirement savings of low-income households.

Helping Low-Income Seniors Save for Retirement

As the Washington-based AARP continues to push Congress for improving retirement security of retirees through strengthening and expanding Social Security, the nonprofit kicks off a new initiative to help people develop better saving habits.

AARP Foundation has launched AARP Foundation MySavingsJarTM, an online resource developed to help older adults and their families take small, achievable steps to save money. More than 5,000 individuals have joined the platform since its beta launch in May 2019.

“More than 37 million older adults are only one unanticipated expense away from serious financial hardship,” said Lisa Marsh Ryerson, president of AARP Foundation, in a statement announcing this new website resource on October 7. “Many have no cash set aside to cover emergencies. AARP Foundation MySavingsJar offers practical tips and local resources to support a savings habit and help older adults start building up financial reserves,” says Ryerson.

AARP Foundation MySavingsJar helps people take small steps to set aside cash to deal with life’s financial challenges – like car repairs, high utility bills or emergency medical treatment. The free program offers social support, resources and expert coaching to help people save and achieve more control over their expenses.

At http://www.mysavingsjar.org participants can sign up to join an online community, set up their personal online savings jar for free, complete community challenges and build short-term savings to help secure their financial future.

For a copy for NIRS’s issue brief, go to http://www.nirsonline.org/wp-content/uploads/2019/09/Financial-Asset-Inequality-FINAL.pdf.