Retire Better: There’s tons of wealth in America—yet tens of millions have nothing

United States

The other day I stumbled across some Federal Reserve data that at first looked quite encouraging for America’s retirees and soon-to-be retirees. But numbers, it seems, are in the eye of the beholder.  

The Fed’s data shows that over the last 15 years—a difficult period bookended by the economic meltdown of 2008 and the COVID-19 pandemic—shows that wealth held by Americans aged 70+ expanded 169%, to $ 34.6 trillion. Meanwhile, wealth held by those between the ages of 55 and 69 grew from $ 26.2 trillion to $ 57.8 trillion, a gain of 120%. Wealth also grew for those between the ages of 40 and 54, but not as impressively, expanding from $ 20.7 trillion to $ 35.6 trillion, a gain of 75%. Intriguingly, the rate of wealth growth picked up again with Americans under age 40, growing 121% to $ 8.9 trillion. 

There’s much to unpack here, and it can be analyzed from many different angles. The first is that the Fed’s data shows total wealth by age group. It reveals next-to-nothing about the true state of finances for most Americans. To get a more accurate picture of this, it’s necessary to break the data down further, and for that I’ll highlight a new survey conducted by Qualtrics on behalf of personal-finance site Credit Karma. With respect to retirement—this is a retirement column, after all—here’s what it shows, and it’s not pretty: 

  • Nearly one-in-five respondents aged 59 and above (19%) don’t have a retirement account, the highest percentage of any generation. 
  • Another 5% of respondents in this age bracket say they can’t afford to contribute to their retirement account at all. 
  • Of those within this group who are employed and are saving for retirement, 17% say they’ve decreased their contributions to their retirement accounts as a result of inflation. 

So older Americans, according to the Fed’s data, are sitting on tens of trillions, yet many have nothing salted away for their golden years. How can both of these things be true? Vast wealth abounds—and yet so many don’t even have a retirement account? No 401 (k)? No IRA? 

The answer is one you’ve probably heard before, namely that the “wealth gap” in this country is wide and getting wider. Additional Fed data reveal that the top 0.1% of Americans owned (as of the first quarter of 2020, on the eve of the pandemic) 11.7% of the nation’s wealth. The top 99% to 99.9% owned an additional 17.6%, while the 90% to 99% owned an additional 38.7%. In other words, 68% of America’s wealth was in the hands of just 10% of Americans. 

A nearly similar percentage—69.1% of Americans—controlled this vast treasure trove, meaning that most wealth is in the hands of a small percentage of older folks. Thus, it should come as no surprise that when so few people take so much of the pie, little is left for everyone else.

Think about that. One-fifth of Americans over the age of 59 without retirement accounts. Given that pensions have faded away in recent decades for most Americans, this pretty much leaves Social Security. And Social Security, as any MarketWatch reader knows, is looking at major cuts—about 20%—starting in 2034, when the vaunted Social Security trust fund is projected to be depleted. When that happens, Social Security will be able to pay out only what it takes in from payroll taxes—and that’s where the cuts come in.

Meanwhile, the outlook for younger generations is also troubling. The largest group of Americans is no longer the baby boomers (born between 1946 and 1964), but millennials, who were born between 1981 and 1996. Nearly two-fifths of this vast group—about 73 million people—have no retirement plan either, according to Credit Karma’s data. The group in between the boomers and the millennials, the so-called Generation X, is in a similar predicament.  

Aside from this unsettling data, something else also stood out in the Credit Karma report. 

Most Americans, it said, don’t know how to calculate their net worth, with far more women than men falling into this category. It also tends to be true for respondents with subprime credit scores (600 and below). All of this suggests the need for more teaching of the financial basics to students. Establishing a budget, using credit cards wisely, avoiding debt, living within one’s means and so forth. If nothing else, it would help younger Americans become more financially savvy. This would drive better financial decisions and behavior in the years ahead 

But that one-fifth of Americans older than 59 with no retirement accounts to their name? I hate to write this, but it’s frankly difficult to see anything in their futures that does not involve financial pain and sacrifice, the (further) lowering of living standards and the possibility of working forever. 

What can be done to help them?