The bottom half of the nation’s baby boomers in terms of net wealth own only 2% of their generation’s financial assets and similar levels of “stark inequality” exist among younger generations, jeopardizing the retirement security of many Americans, according to a new report from the National Institute on Retirement Security.
The report also found that whites in each generation own an oversized share of financial assets when compared with other races. But regardless of age or race, the wealth gap between average Americans and their wealthy peers is large, suggesting that without substantial policy changes to help Americans save more, millions will struggle to maintain their standard of living in retirement, NIRS said.
NIRS, a nonprofit, nonpartisan research group, analyzed data from the Federal Reserve’s Survey of Consumer Finances, which is conducted every three years, most recently in 2019. The report examines Americans’ ownership of financial assets, broken down by net worth, generation, and race.
Tyler Bond, NIRS research manager and author of the report, says financial asset ownership is directly connected to retirement security because most workers are expected to build their retirement savings on their own through 401(k) plans, individual retirement accounts, and similar investment vehicles.
“If we have a retirement system that’s predicated upon households saving on their own to finance their retirement, we can see why so many people are struggling to maintain their standard of living in retirement, when the bottom half of households own hardly any financial assets,” he says.
Most seniors will receive Social Security, which accounts for the bulk of the monthly income for retirees in the lower half of the income bracket, Bond says. But the report “does start to indicate why there is such a retirement savings gap in the U.S.,” he adds.
The report defined baby boomers as those ages 55 to 73 in 2019, Generation X as those 39 to 54, and millennials as those ages 23 to 38. In each group, wealth is concentrated at the top, according to NIRS.
● Among baby boomers, the top half in terms of net worth owned 98% of their generation’s financial assets in 2019. For Generation X, that figure was 97%, and for millennials, it was 92%.
● The top quartile of baby boomers owned 91% of their generation’s financial assets, compared with 89% for Generation X and 76% for millennials.
● The top 10% of boomers owned 74% of their generation’s financial assets, compared to 72% for Generation X and 55% for millennials.
● The top 5% of boomers and Generation X each owned 58% of their generation’s financial assets, compared with 39% for millennials.
When each generation is broken down by race, the data show a similar level of inequality, according to the report. White Americans own most of each generation’s financial assets. And within each race, richer individuals own the bulk of the assets, which explains why the average figure for household net worth is markedly higher than the median figure.
● Among baby boomers, 91% of financial assets were owned by whites, 3% by Blacks, 2% by Hispanics and 4% by all other races. The top quartile of whites owned 84% of assets, compared with only 2% for the top 25% of Blacks.
“That means that for Black households in the bottom 75%, they own hardly anything in terms of financial assets,” Bond said. “This starts to show why so many not just working-class but even middle-class households are struggling to accumulate enough savings in order to finance their retirement.”
Whites make up 74% of boomers. They had an average of $739,186 in financial assets in 2019, but the median figure was sharply lower at just $80,700. For Blacks, those figures were $99,426 and $5,020. For Hispanics, they were $174,700 and $4,900.
● In Generation X, whites owned 77% of financial assets, compared with 4% for Blacks, 2% for Hispanics and 17% for other races. The top quartile of whites owned 69% of assets, while the top 25% of Blacks owned 2%.
Whites account for 63% of Generation X. They had an average of $392,179 in financial assets, with a median of $60,860. For Blacks, those numbers were $80,269 and $9,040. For Hispanics, they were $56,970 and $4,550.
● For millennials, 75% of financial assets were owned by whites, compared with 8% for Blacks, 7% for Hispanics, and 10% for other races. The top quartile of whites held 61% of assets, while the top 25% of Blacks owned 3%.
Whites are 59% of the generation. They had an average of $63,318 in financial assets, with a median of $16,050. For Blacks, those figures were $20,780 and $4,800. For Hispanics, they were $21,783 and $3,620.
To help more Americans finance their retirement, NIRS identified several policy recommendations, including expanding Social Security, increasing access to pensions, and expanding access to workplace retirement savings plans to low-income workers.
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