Unequal asset ownership is undermining retirement for middle-class Americans, says the Washington, D.C.–based National Institute on Retirement Security (NIRS) in a new report. The NIRS is a nonprofit, nonpartisan research institute that informs U.S. policy.
The NIRS conducted research using data from the Federal Reserve’s Survey of Consumer Finances — the most recent survey data is from 2019 — and focused on households’ financial assets overall (not just their retirement savings), excluding physical assets like homes and cars.
Among the findings was that financial assets are concentrated among high-net-worth Americans, and inequality in asset ownership persists and deepens over time. For example, the top 5% of baby boomers by net worth owned a greater percentage of that generation’s financial assets in 2019 (58%) than in 2004 (52%).
The research also found that white households held more financial assets than Black and Hispanic ones. For example, in 2019 white households of the three generations in the report — baby boomers, get-Xers and millennials — owned three-quarters or more of their generation’s financial assets.
The findings are concerning, given that U.S. retirement savings have shifted over the past four decades to focus on personal assets, specifically 401(k)s, instead of defined-benefit pension plans.
“A retirement system built around the individual ownership of financial assets cannot provide retirement security for many if the ownership of financial assets is concentrated among the few,” said Tyler Bond, research manager with NIRS and the report’s author, in a release.
To address inequality, the report suggested such things as protecting pensions, strengthening and expanding Social Security, increasing access to savings-based plans for low-income workers, and reforming retirement tax incentives.
Such reforms would “lead to more secure retirements and would promote a strong, broad middle class,” the report concluded.
According to Natixis’ 2020 global retirement index, which is based on criteria related to finances in retirement, health, quality of life and material well-being, the U.S. ranked 16th for retirement security, in part because of poor performance on income equality. Iceland topped the rankings, and Canada was eighth.