Research

Social Security Reduces Inequality in Retirement Wealth

January 1, 2020

Brief— Social Security benefits are progressive and reduce the unequal distribution of retirement wealth generated by a broken employer-based retirement systemSocial Security benefits are progressive and reduce the unequal distribution of retirement wealth generated by a broken employer-based retirement system.

Authors: Teresa Ghilarducci, Siavash Radpour, and Anthony Webb

Highlights from ReLab's policy note include:

  • Social Security reduces - but does not eliminate - retirement wealth inequality.
  • For typical workers age 51-56, accrued Social Security benefits exceed employer-sponsored
    retirement wealth. Median Social Security wealth amounts to $81,900 compared with $67,000 in
    employer-sponsored retirement plans.
  • At ages 51-56, the typical low-wage worker (in the lowest 20% of earnings) has no retirement
    wealth. The typical high-wage worker (in the highest 20% of earnings) has wealth equal to almost
    two and a half times their earnings.
  • Adding accrued Social Security benefits to retirement wealth decreases the retirement wealth gap
    between low and high earners from two and a half times earnings to just over half a year’s earnings.

While adding accrued Social Security benefits to retirement wealth decreases the retirement wealth gap between low and high earners and keeps retirees out of poverty, American workers still face a retirement crisis. Policymakers need to strengthen and expand Social Security and mandate employer-sponsored retirement plans to ensure universal coverage and adequate retirement income.