PhotoOnce upon a time the average American consumer worked at the same place for 30 or 40 years and retired with a modest pension and Social Security, enough to live out their days in relative comfort.

That was before escalating medical costs, longer lifespans, and the wholesale replacement of defined pensions with individual retirement savings plans.

A new report from the Economic Policy Institute (EPI) finds that an increasing number of Americans have saved little or nothing for retirement, and has focused on characteristics of savers.

The study found that retirement wealth more than kept pace with incomes over the past 25 years. It nearly doubled as a share of personal disposable income between 1989 and 2013, with retirement account savings exceeding pension fund assets after 2012. While that seems to be a positive, the study notes that there is a distinct disparity among those who are saving and those who are not.

Widening retirement gaps

It suggests the shift from traditional pensions to individual savings has widened retirement gaps. High-income, white, college-educated, and married workers participate in defined-benefit pensions at a higher rate than other workers, but participation gaps are much larger under defined-contribution plans.

For many groups—lower-income, black, Hispanic, non-college-educated, and unmarried Americans—the typical working-age family or individual has no savings at all in retirement accounts.

“And for those who do have savings, the median balances in retirement accounts are very low,” the authors write.

The report also finds that economic turmoil takes a toll on retirement savings. Much of the 401(k) era coincided with rising stock and housing prices that propped up family wealth measures even as the savings rate declined.

This house of cards collapsed in 2000–2001 and again in 2007–2009. By 2013 most families were still feeling the impact from the financial crisis and Great Recession, reducing, if not eliminating, their ability to save for retirement.

Younger consumers not saving

At this point, the authors believe younger generations should be stepping up their retirement savings in defined-contribution plans. But while the retirement account savings of families approaching retirement grew before the financial crisis and Great Recession, those of younger families stayed flat.

At this point, the report notes the much discussed income inequality extends to retirement savings. The rich have gotten better prepared while the poor continue to lose ground.

“Participation in retirement savings plans is highly unequal across income groups,” the authors write. “In 2013, 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.”

The report says the disparity has grown in the last decade as the share of working-age families with retirement account savings declined for all except the top income group. It concludes that it may be normal for higher-income families to have more savings, but it is not normal for most families in the bottom half of the income distribution to have no retirement account savings at all. That, the authors say, is a serious policy failure.

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