A new report by the U.S. Government Accountability Office identifies two trends that may significantly affect Americans’ financial security in retirement.
Income and wealth inequality among older households has increased over the past three decades, while life expectancy has been rising, albeit not uniformly across the American population.
GAO analyzed data from 1989 through 2016 from the nationally representative Survey of Consumer Finances, and data from 1992 through 2014 from the Health and Retirement Study, a nationally representative poll that follows the same individuals over time, linked to earnings records from the Social Security Administration.
Researchers divided older households into five groups, based on their wealth and income. Each year of data comprised different sets of households over time.
The analysis showed that average income rose far more for the top quintile than for the rest of the population. In 2016, household income in the top 20% averaged $398,000, compared with $53,000 for the middle quintile and just $14,000 for the bottom one.
For less wealthy quintiles, future income from Social Security and defined benefit pensions provided a relatively bigger chunk of resources in retirement for those who expected such income.
Analysis of HRS data showed that a substantial number of Americans born from 1931 through 1941 lived at least into their 70s and early 80s. GAO divided these individuals into quintiles based on their mid-career earnings.
It found that differences in income, wealth and demographic characteristics were associated with disparities in longevity: 74% of those in the top quintile were still alive in 2014, versus 52% in the bottom quintile.
Yet the upshot is that “individuals may live a long time, even individuals with factors associated with lower longevity, such as low income or education,” according to the GAO. “Those with fewer resources in retirement who live a long time may have to rely primarily on Social Security or safety net programs.”