The Rich Get Richer and the Poor Get Poorer

Over the last several decades, employers have moved away from pension-based retirement plans toward the 401(k) savings model. Participation in these do-it-yourself retirement savings plans is highly unequal across income groups because the system is stacked against those who can least afford to contribute and to bear investment risks. Lower-income workers get skimpier matching contributions from employers and often receive little or no tax benefit, but still face a penalty if they need to tap their savings early.

According to new research by the Economic Policy Institute, nearly nine in 10 families in the top income fifth had retirement account savings, compared with fewer than one in 10 families in the bottom income fifth (see the first figure below).

Additionally, families in the top income fifth accounted for 63 percent of total income, but 74 percent of total savings in retirement accounts (see the second figure below) illustrating the degree to which 401(k)s favor those with higher incomes.

This disparity across income groups highlights a serious policy failure that is exacerbating income inequality as well as the existing retirement security crisis with two-thirds of seniors relying on Social Security for a majority of their income.

The policy solution to the retirement security crisis is to protect and expand Social Security for millions of Americans, not cut our only universal guaranteed source of retirement income.

Please join us in calling on Congress to expand – not cut – Social Security.

To Congress:


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