National Institute on Retirement Security (NIRS) Issue Brief

The United States faces a growing retirement savings crisis. Many working Americans have no retirement savings and even among those who are saving, most have insufficient assets to maintain their current standard of living in retirement. While US financial wealth—including retirement wealth—has grown rapidly, much of this wealth is owned by a small share of households.

This issue brief updates a 2006 analysis by the Government Accountability Office (GAO) on the concentration of household financial assets. This study finds that financial asset inequality among Baby Boomers increased significantly between 2004 and 2016. The study also finds a similarly skewed ownership of financial assets among the Millennial and Generation X cohorts.

This is especially troubling because American workers face an increasing retirement savings burden due to the decline of pensions in the private sector and longer life expectancy. The persistent concentration of financial assets among the wealthiest families, combined with anemic retirement savings among most households, poses a significant economic threat to the retirement security of many working Americans.

This new research finds:

1. Financial asset inequality has increased significantly among Baby Boomers since 2004.

• 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.
• ver the same time period, 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.
• 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.

2. Financial asset inequality appears to be growing worse across generations. Generation X and Millennials appear to have reached comparable degrees of financial asset concentration among the wealthiest households as Baby Boomers, at younger ages.

• In 2016, Generation X was about 4 years younger on average than Baby Boomers in 2004. Yet the top 25 percent of Generation X households owned 87 percent of financial assets in 2016, compared to 86 percent for their Baby Boomer counterparts in 2004.
• Millennials in 2016 reached a comparable degree of financial asset concentration as Baby Boomers in 2004 — 85 percent versus 86 percent owned by the wealthiest 25 percent of their cohort – two full decades earlier in their lifecycle.

3. Financial asset inequality is exacerbated by regressive tax incentives for retirement savings and unequal access to employer-provided retirement plans.

NIRS recommends three well-established public policy proposals as starting points to improve retirement security for working Americans:

• Strengthen and expand Social Security.
• Support state efforts to establish state-facilitated retirement savings plans in order to facilitate asset building among the roughly half of U.S. private sector workers who lack access to a workplace retirement plan.
• Promote and improve the federal Saver’s Credit to help build the retirement savings of low-income households.