Retirement Plans Soar in Strong Market, But Half of Americans Missing Out

Americans with 401(k)s have had reason to celebrate the last two years, as record stock market performance has inflated retirees’ nest eggs.

But despite all the sunny news, a huge swath of Americans is missing out, according to a Thursday post from the Center for Retirement Research at Boston College.

The CRR, which has written extensively about home equity’s place in retirement plans, notes that a full 48% of families in the United States do not own any equities, according to the Federal Reserve’s most recent Survey of Consumer Finances.


All this means that amid a 19% gain in the stock market in 2017 and a 6% rise so far in 2018 — and the president’s regular bragging about the state of the stock market and its effects on Americans’ 401(k) plans — just about half of citizens are missing out.

“The chasm between the well-heeled and the ordinary workers has been widening,” the CRR observes. “Stock ownership is one prism through which to view that inequality.”

The CRR also points out that among those whose incomes fall in the bottom half nationwide, only 30% own some type of equity, which includes 401(k)s, brokerage accounts, stocks, and mutual funds. Despite wage gains of 2.5% over the course of last year, hourly workers also saw inflation of 2.1%, which largely wiped out those improvements, according to the CRR.

“One in two Americans isn’t at the party,” the CRR concludes.

Take a look at the CRR’s analysis of our current bull market, along with their other resources, at their Squared Away Blog.

Written by Alex Spanko

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  • How are members of the industry doing in marketing the need of HECMs to help in offsetting losses from the sequence of returns risk when the equity markets are booming? I would think it would be difficult but I am no longer originating.

  • In reading the list of investment vehicles and types of investments in the markets, one major retirement instrument is missing. Even Boston College seems to forget about employer sponsored and funded profit sharing and pension plans.

    Generally these plans are not as easily “tapped” as the IRAs and 401(k)s that John mentions in his comment. For example I have a brother who is in an OK paying job in city government but has hundreds of thousands allocated to his account and also one for his former spouse; he has worked there for over 30 years. He contributed nothing to these pension funds.

    Many employees of the federal government and even of universities also have rather large pensions paid for solely by their employer. Unless there is an underlying agenda, it is hard to imagine why such retirement vehicles are not included in the Boston College presentation especially as a result of the increased pension contributions being made by private businesses for last year in order to take advantage of the old tax rates. CNBC has been discussing this for several weeks.

    Like John, I do believe many seniors go into retirement with little funding from any source other Social Security benefits and some investments they have been able to acquire and hold. The magnitude of this group is not small and many are homeowners (with and without forward mortgages requiring monthly payments). So there is still a market for reverse mortgages particularly for these individuals as long as they can qualify after financial assessment and generally lower principal limits, especially when compared to those of Standard HECMs back in early 2012.

      • John,

        It is odd that there is so much written about seniors with 401(k)s and IRAs when there are gigantic mounds of cash vested in a substantial number of seniors employer defined benefit and defined contribution retirement plans.

        Another source of potential assets for retirees are employer health plans covering many things that Medicare does not. Again life insurance plans, annuities, bonds, installment sales, pass through entity investments, growth stocks, rentals, royalties, gold, and numerous other sources of income and gains are generally ignored in the type of analysis like described in the post.

        Then there is also return of the capital paid for investments which is in most cases is additional cash flow to the senior. For example, a senior has a second home that he bought for $150,000 but is only worth $120,000. He sells the home and the mortgage of $35,000 is paid in full leaving the senior with say about $75,000 in cash flow after the payoff of all selling expenses. So while the sale resulted in loss and large costs, it also generated a lot of cash.

        We need to understand the actual situation of seniors stratified by the actual wealth seniors possessed. Many might be surprised how many seniors are fully capable of handling their retirement with no outside help from debt.

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