Wealth Inequality

Commentators often cite misleading statistics that older Americans hold most of the nation’s wealth, without ever noting the crushing impact of wealth inequality on this age group.

The AARP Public Policy Institute reported in June 2015 that the  top 10 percent of households in their fifties hold 71 percent of the wealth of all households in this age group. The Institute also reported:

  • The distribution of account balances in 401(k)s and other retirement accounts – most of which are taxpayer-subsidized – is only slightly less skewed than total wealth. The top 10 percent of households aged in their fifties hold 62 percent of total retirement account balances for this age group.
  • More than two-fifths of 50+ households have no retirement account savings at all. Of those that do, half have under $100,000 and many have much less.
  • Half of households have $12,000 or less in retirement account savings as they approach retirement age.

Demos, a public policy think tank based in Washington, DC, reported in 2014 that in all age groups, including older Americans, the bottom half of the group owns between -8 percent and 6 percent of the age group’s wealth. The top 10 percent owns between 68 percent and 82 percent of the group’s wealth.  See Wealth is Distributed Extremely Unevenly Within Every Age Group, Matt Bruening (September 8, 2014).

WealthDistribution

 

According to a report by the Global Aging Institute, 18 percent of  Americans aged 65 and older had an income  of less than 50 percent of the median income for all persons  in 2010- a standard threshold in international poverty rate comparisons. This was higher than in the United Kingdom, Canada,  Netherlands, Sweden, France, Germany and Italy. (Meanwhile, during the past 25 years, public spending on health care grew at an average annual rate of 4.1 percent, higher than any of other nine countries studied and twice as high as that of Canada, Germany, Sweden and Italy).

A 2013 study by the Economic Policy Institute , a nonprofit, nonpartisan think tank, documents alarming economic insecurity among older Americans, especially women.

Most Severe for Minorities

The Economic Policy Institute also found that:

  • Forty-eight percent of  America’s 41 million seniors are “economically vulnerable,” defined as having an income that is less than two times the supplemental poverty threshold (a poverty assessment that is more comprehensive than the traditional federal poverty line). This equates to roughly 19.9 million seniors.
  • Women are 10.7 percentage points more likely to fall below two times the supplemental poverty threshold than men (52.6 versus 41.9 percent).
  • The majority of older blacks and Hispanics are economically vulnerable: 63.5 percent of blacks and 70.1 percent of Hispanics. By comparison, 43.8 percent of whites are economically vulnerable.
  • The share of economically vulnerable older Americans varies across the states, from a low of 35.4 percent in North Dakota to a high of 59 percent in the District of Columbia.
  • Younger Americans are, on the whole, more likely to be well-off than older Americans. About 70 percent of younger adults have incomes at or greater than two times the official poverty line compared with 66 percent of older adults. And 40.0 percent of younger adults have incomes at least four times the poverty line, compared with only 31.6 percent of older adults.

MostVulnerableinRetirementr

 

Age Discrimination and Poverty

Lack of wealth arguably is a more severe problem for older workers, who face epidemic age discrimination in hiring and have less time remaining in the workplace to accumulate wealth.  Older people have a hard time both keeping and finding work as a result of  age discrimination. Once jobless, they disproportionately experience long-term unemployment compared to younger workers.  Older workers often are dumped into chronic unemployment, low-paid part-time work, and, ultimately, a penurious retirement.

A much higher percentage of women than men who are aged 65 and older live in poverty.

According to the Social Security Administration, the median income of individual males aged 65 and older was $29,327 in 2013 compared to $16,301 for individual females. Median means that half had a higher income and half had a lower income.

These findings correspond to a chart published by Money Magazine which found that women are almost twice as likely as men to live below the poverty line during retirement, with single and minority women struggling the most. (See chart below).

Life below the poverty line (Source: GAO analysis of Census data for 2012)

Population Male Poverty rate  Female poverty rate
All 65 and older  6.6% 11%
Married 4.7% 4.9%
Widowed 10.1% 14.5%
Divorced 12.2% 17.1%
Separated 10.8% 35.4%
Never married 15.7% 23.2%
White 4.6% 8.6%
Black 13.2% 21.3%
Asian 11.6% 11.9%
Hispanic 19.1% 21.8%

Poverty is a silent killer

Having sufficient income in retirement provides access to good nutrition and medical care. This means that older Americans with sufficient income live longer than their poor counterparts.

In 2014, a Brookings Institution study found that men born between 1920 and 1940 who survived to age 55 and were in the bottom tenth of the income distribution could expect to live to age 79.2, while men in the top tenth of the income distribution could expect  to age 89.3. One reason for the difference is lack of resources to manage chronic disease.

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The Growth of Inequality

The gap in wealth equality has grown exponentially in the the United States. (See chart below)

BUSINESS INSIDER’S CHART ON INCOME INEQUALITY IN THE UNITED STATES OVER THE PAST FORTY YEARS.

income inequality

 

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