Asset Accumulation Increasingly Unequal, Especially for Minorities

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A new report from the National Institute on Retirement Security (NIRS) finds that economic inequality continues to grow, with Blacks and Hispanics owning only a fraction of financial assets. Even though Gen X and Millennial generations are more diverse, whites continue to dominate when it comes to accumulating financial assets, according to the non-profit policy organization. The economic inequality ultimately translates into financial insecurity in retirement, which is exacerbated by the shift from pensions to individual 401k savings accounts.   

“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, report author and NIRS’s research manager.

Generational disparities

The report also noted accumulation varied amongst generations:  

Bond noted that the data shows “an alarming reality for Blacks and Hispanics” because not only do they hold a small share of financial assets across generations, that share is falling in some cases. 

“Absent serious policy changes, Blacks and Hispanics are not positioned to improve their economic and retirement outlook,” he starkly predicted. 

Time deepens inequality

Inequality in the ownership of financial assets both persists and deepens over time, according to the report. The top five percent of Baby Boomers by net worth owned a greater percentage of that generation’s financial assets in 2019 (58%) than in 2004 (52%).

The inequity is also consistent across generations. In 2019, the top 25% by net worth of Millennials, Generation X, and Baby Boomers owned three-quarters or more of their generation’s financial assets.

Other findings include:

Solving the problem

A range of potential solutions exists to address this stark inequality including strengthening and expanding Social Security, protecting pensions, increasing access to savings-based plans for low-income workers, and reforming retirement tax incentives.

“This stark inequality is even more problematic because the U.S. has largely shifted to a retirement system built around the individual ownership of financial assets in 401(k) or IRA accounts rather than pensions. Few financial assets during one’s working years translates into retirement insecurity later in life,” Bond explained.

The NIRS is also holding a webinar that will further review the report’s research on September 8th at 2:00 PM ET.

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