urban institute nonprofit social and economic policy research

Diversity in Retirement Wealth Accumulation

Read complete document: PDF

PrintPrint this page
Share on Facebook Share on Twitter Share on LinkedIn Share on Digg Share on Reddit
| Email this pageE-mail
Document date: December 17, 2008
Released online: December 17, 2008

The text below is an excerpt from the complete document. Read the full brief in PDF format.


Americans save for retirement by building wealth in personal accounts, home equity, pension plans, retirement accounts and Social Security. We use data from the Survey of Consumer Finances (SCF) and methods to estimate the wealth values of Social Security and pension plans to show how wealth builds over the life cycle. We find that the typical household accrues wealth throughout the life cycle. Households in the bottom income quintile, those that did not complete high school and minorities accumulate much less wealth than their counterparts, and Social Security accounts for a large share of their preretirement wealth.


Americans save for retirement through a number of different avenues. In addition to personal savings, workers build wealth through homeownership, pension plans, retirement accounts, and Social Security. Ideally, workers build sufficient wealth during their careers to maintain their preretirement lifestyles after they leave the paid labor market, but many appear to fall short (Penner 2008a). The personal saving rate is near its historic low and many retirees, including a disproportionate share of minorities and other vulnerable populations, rely almost completely on their Social Security benefits (Penner 2008b; Social Security Administration 2008).Recent dramatic downturns in home values and retirement accounts have further reduced wealth available to finance retirement.

Understanding how adults accumulate wealth over their working lives and how accumulation patterns vary by income and demographics may shed light on ways to enhance retirement security in the future. We first show wealth levels by source for preretirement households ages 55 to 64. We then focus on savings buildup as households age and highlight how total wealth accumulations vary by income, education, and race. We use the Survey of Consumer Finances, generally considered the best source of wealth information, augmented by estimates of asset values for Social Security and defined benefit (DB) pension benefits. The analysis presents a uniquely comprehensive view of wealth accumulation, because Social Security and DB pensions are essential components of wealth that are usually excluded from empirical estimates.

We find that typical households ages 55 to 64 have substantial wealth in Social Security, home equity, and retirement plans, but relatively little in personal savings. Households accrue wealth throughout the life cycle, but asset categories such as Social Security and pension wealth accumulate at very different rates as adults age from middle to late career. Households in the bottom income quintile, those that did not complete high school, and minorities accumulate much less wealth than their counterparts, and Social Security comprises a large share of their preretirement wealth. The results reflect differences in households? ability to save, limited pension coverage among lower-wage workers, and tax preferences that mainly encourage savings among higher-income groups. Policies designed to increase retirement savings among older adults must address these factors and recognize the primacy of Social Security savings for lower-income groups.

(End of excerpt. The entire brief is available in PDF format.)

Topics/Tags: | Economy/Taxes | Retirement and Older Americans

Usage and reprints: Most publications may be downloaded free of charge from the web site and may be used and copies made for research, academic, policy or other non-commercial purposes. Proper attribution is required. Posting UI research papers on other websites is permitted subject to prior approval from the Urban Institute—contact publicaffairs@urban.org.

If you are unable to access or print the PDF document please contact us or call the Publications Office at (202) 261-5687.

Disclaimer: The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders. Copyright of the written materials contained within the Urban Institute website is owned or controlled by the Urban Institute.

Email this Page