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. 

About SCEPA

SCEPA works to focus the public economics debate on the role government can and should play in the real productive economy - that of business, management, and labor - to raise living standards, create economic security, and attain full employment.