Retirement Inequality Greater Than Income Inequality

Retirement inequality hitting many hard

Peter and Maria Hoey for The Boston Globe

Almost everyone will retire, but it’s mostly the rich who are planning for that day. The middle class, the poor, minority groups — many of them don’t even have retirement accounts, much less substantial savings.

The 401(k) revolution, with its promise of portable, tax-advantaged investment accounts for all, has inadvertently brought the scourge of inequality into the world of retirement savings. Today, retirement inequality is actually worse than income inequality.

People are saving more than ever before. But the bulk of that savings is stashed away in a small number of accounts, held by the fortunate few who make big salaries and are good savers.

Half of all families in the United States have less than $5,000 in retirement accounts (According to the NIRS the median account is only $3,000), according to an analysis by the Economic Policy Institute, a nonpartisan think tank focused on the needs of low- and middle-income workers.

Only about one in five families can boast $100,000 or more — still not much to last through decades of retirement.

The median retirement savings for families led by someone 55 to 61 years old is still just $17,000.

Families in the top fifth of the income ladder represent 20 percent of the US population, but collect 63% of all income, and hold 74% of the retirement savings.

Their peers in the middle of the income ladder. They, too, represent 20 percent of the population, but they only get 10 percent of income and control a bare 5 percent of all retirement savings.

Pension plans promise a set payout at retirement, and they don’t require as much active involvement. With a 401(k), employees control contribution levels and make investment decisions; with a pension plan, the company mostly takes care of these decisions.

Consider that about 60 percent of black families and 75 percent of Hispanic families don’t have retirement accounts.

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