The Transformation of the American Pension System: Was It Beneficial for Workers?

Contents

v Contents Preface xiii 1 Introduction 1 A Précis of the Book 3 Chapter Outline 5 2 Recent Trends in Household Wealth, 1983–2009: Robust Growth 11 Followed by Collapse Data Sources and Methods 14 Median Wealth Rose Briskly during the 2000s 16 Wealth Inequality Shows Little Change over the Early and Mid-2000s 18 Household Portfolios Show a Pronounced Shift into DC 20 Pension Accounts Portfolio Composition by Wealth Class 23 The Racial Divide Remains Largely Unchanged over Time 27 Wealth Shifts from the Young to the Old 31 Stock Ownership First Rises and Then Falls 36 An Update to 2009 39 A Wealth Inequality Puzzle 42 Summary and Concluding Comments 44 3 Review of the Literature on Retirement Wealth and 49 Retirement Adequacy Did Pension Coverage Rise? 50 Did Pension and Retirement Wealth Increase? 51 Do Pensions Reduce Other Forms of Savings? 55 Has Retirement Adequacy Improved over Time? 57 Are There Also Improvements in the Economic Status 65 of the Elderly? What Were the Effects of the 2007–2009 Recession on 70 Pension Wealth? 4 The Slowdown in Pension Wealth Growth in the 2000s 81 Accounting Framework 82 Pension Coverage on the Employee Level 89 Trends in Private Accumulations 112 DC Employer Contributions (DCEMP) to Defined Contribution 119 Pension Plans Summary of Findings 121 Wolff.indb v Wolff.indb v 11/21/2011 9:16:38 AM 11/21/2011 9:16:38 AM vi 5 Stagnation of Retirement Wealth in the 2000s 131 Social Security and Total Retirement Wealth 131 Augmented Wealth 142 Alternative Pension Wealth Calculations 147 Update to 2009 160 Summary and Conclusions 166 6 Differences in Retirement Wealth by Demographic and 171 Household Characteristics Trends and Composition of Retirement and Augmented Wealth 172 Disparities in Retirement Wealth by Demographic Group 183 Summary and Concluding Remarks 207 7 Retirement Prospects 211 Measuring Retirement Income Adequacy 213 Expected Retirement Income 216 The Expected Poverty Rate at Retirement 233 Replacement Rates 240 8 Conclusions and Policy Recommendations 255 Summary of Principal Findings 255 Policy Recommendations 265 Appendix A: Sources and Methods Used for the Survey of 273 Consumer Finances Data Appendix B: Estimation of Pension and Social Security Wealth 277 Appendix C: Augmented Wealth Including Employer 293 Contributions to DC Plans and Net of Taxes Appendix D: Extended Results on Retirement Adequacy 295 References 311 Author 321 Index 323 About the Institute 333 Wolff.indb vi Wolff.indb vi 11/21/2011 9:16:39 AM 11/21/2011 9:16:39 AM vii Figures 2.1 Mean and Median Household Wealth, 1983–2007 (in thousands, 17 2007$) 2.2 Age-Wealth Profiles, 2007 (ratio to overall mean wealth by 33 age group) 2.3 Wealth Inequality, Income Inequality, and the Ratio of Stock 43 Prices to House Prices, 1922–1998 2.4 Predicted versus Actual Wealth Inequality, 1922–1998 44 4.1a Percentage Difference between DC and DB Pension Wealth 110 among Account Holders by Pension Percentile, All Households , 2007 4.1b Percentage Difference between DC and DB Pension Wealth 110 among Account Holders by Pension Percentile, Aged 47–64, 2007 4.2a Percentage Change in Pension Wealth by Percentile, All 111 Households, 1989, 2001, and 2007 4.2b Percentage Change in Pension Wealth by Percentile, Aged 111 47–64, 1989, 2001, and 2007 4.3a Percentage Change in Private Accumulations by Percentile, 116 All Households, 1989, 2001, and 2007 4.3b Percentage Change in Private Accumulations by Percentile, 116 Aged 46 and Under, 1989, 2001, and 2007 4.3c Percentage Change in Private Accumulations by Percentile, 117 Aged 47–64, 1989, 2001, and 2007 4.3d Percentage Change in Private Accumulations by Percentile, 117 Aged 65 and Older, 1989, 2001, and 2007 5.1a Percentage Change in Social Security Wealth in 2007$ by 136 Percentile, All Households, 1989, 2001, and 2007 5.1b Percentage Change in Social Security Wealth in 2007$ by 136 Percentile, Aged 46 and Under, 1989, 2001, and 2007 5.1c Percentage Change in Social Security Wealth in 2007$ by 137 Percentile, Aged 47–64, 1989, 2001, and 2007 5.1d Percentage Change in Social Security Wealth in 2007$ by 137 Percentile, Aged 65 and Older, 1989, 2001, and 2007 5.2a Percentage Change in Retirement Wealth in 2007$ by Percentile, 140 All Households, 1989, 2001, and 2007 (2007$) 5.2b Percentage Change in Retirement Wealth in 2007$ by Percentile, 140 Aged 46 and Under, 1989, 2001, and...