Wealth Distribution and Retirement Preparation among Early Savers Wealth Distribution and Retirement Preparation among Early Savers

By Lindsay Jacobs, Elizabeth Llanes, Kevin Moore, Jeffrey P. Thompson, and Alice Henriques Volz

The authors develop a new combined-wealth measure that augments data from the Federal Reserve Board’s triennial Survey of Consumer Finances (SCF) with estimates of the asset value of defined benefit (DB) pensions and expected Social Security benefits. They use this expanded definition of household wealth to study the adequacy of retirement resources among households preparing for retirement and to explore inequality in the distribution of economic resources.

This study evaluates the resources of households whose heads are in their 50s and those of households whose heads are in their 40s. It employs two measures of preparation for retirement: a wealth-to-income ratio that divides the combined-wealth measure by the current reported household income, and an annuity measure of wealth that compares the estimated annuity amount with the poverty level for elderly households. This study also uses the estimated annuity amount to calculate the share of households in the 40–49 and 50–59 age groups that fall below various multiples of the poverty threshold. For measuring inequality of wealth, the study uses shares of combined wealth held by the top 10 percent and top 5 percent of the distribution.

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