Is the Equalizing Effect of Retirement Wealth Wearing Off?

Levy Economics Institute Working Paper No. 420

82 Pages Posted: 20 Apr 2005

See all articles by Edward N. Wolff

Edward N. Wolff

New York University (NYU) - Department of Economics; National Bureau of Economic Research (NBER); Bard College - Levy Economics Institute

Abstract

Retirement wealth is often viewed as a great equalizer, offsetting the inequality in standard household net worth. One of the most dramatic changes in the retirement income system over the last two decades has been a decline in traditional Defined Benefit (DB) pension plans and a sharp rise in Defined Contribution (DC) pensions. Using data from the Federal Reserve Board's Survey of Consumer Finances, I find that retirement wealth (the sum of pension and Social Security wealth) has a considerably weaker offsetting effect on wealth inequality in 2001 than in 1983. Whereas standard net worth inequality increased modestly between 1983 and 2001, the inequality of augmented wealth (the sum of retirement wealth and net worth) surged from 1983 to 2001, very much in line with income inequality. Moreover, whereas median net worth climbed substantially from 1983 to 2001, median augmented wealth actually fell over this period.

Keywords: Pensions, Social Security, Wealth, Inequality

JEL Classification: J32, D31, H55

Suggested Citation

Wolff, Edward N., Is the Equalizing Effect of Retirement Wealth Wearing Off?. Levy Economics Institute Working Paper No. 420, Available at SSRN: https://ssrn.com/abstract=698203 or http://dx.doi.org/10.2139/ssrn.698203

Edward N. Wolff (Contact Author)

New York University (NYU) - Department of Economics ( email )

269 Mercer Street, 7th Floor
New York, NY 10011
United States
212-998-8917 (Phone)
212-995-4186 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Bard College - Levy Economics Institute

Blithewood
Annandale-on-Hudson, NY 12504
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
109
Abstract Views
1,357
Rank
450,735
PlumX Metrics