Thursday, September 12, 2013

Even in retirement, America is more unequal

Only half of Americans saved more than $2,500 for retirement, according to a new study published by the Economic Policy Institute. Researchers warn that retirement plan “participation has been flat or declining in recent years [when participation should be increasing] as the baby boomers enter their 50s and early 60s, [ages] when participation rates tend to be high.”

Households in the top one percent average over $1.3 million in retirement account savings.

At the same time, only 45 percent of workers age 26 to 61 added to any sort of retirement plan in 2010. Ten years ago, 52 percent of the population participated.

Shrinking retirement plans are a stark reminder of how few people actually can afford to save for their futures, as workers across all ages are finding it harder to contribute to retirement savings.

Even as little as a decade ago, more workers across the board were paid enough that they could plan for the future.

Only 36 percent of 26 to 31 year olds had savings for their retirement in 2010. In 2000, 43 percent did.

Almost 60 percent of workers aged 50 to 55 added to pension plans in 2000. A decade later, nine percent fewer workers in the same age group manage to add anything to their retirement savings.

And the later workers were born, the less likely they are to actually have significant retirement savings as they grow older.

After adjusting for inflation, Americans aged 62 to 67 in 2010 managed to increase their average retirement savings 455 percent over their 1992 counterparts, but the average worker in any age bracket under 44 managed to save just about what a similar worker in 1998 did.

The EPI report notes:
Successive generations should be saving more in retirement accounts due to their higher average incomes, the shift from pensions to individual savings, and Social Security benefit cuts. But while the retirement savings of middle-aged and older households have generally grown, those of younger households have stayed flat or declined in recent years.
Just like income itself, who can afford to save for retirement is grossly unequal.

Seventy-two percent of total 2010 retirement savings came from households in the top 20 percent of income, meaning that most tax subsidies for retirement savings go to high-income households, assuming they file their taxes correctly.

Even factoring in record-breaking salaries, the top fifth of paid workers still has a much higher percentage of retirement savings-to-income than any other group and save over 90 percent more than what their 1989 equivalents managed.

At least Americans can keep on working for longer, as people are getting older and older. Unless they actually can’t.