The gap in retirement savings between the rich and poor has
been growing significantly.
Households in the lowest income bracket (those earning less than
$39,000/yr) have a median savings balance of $13,000. However, those in the highest income bracket (those earning
$138,000/yr or more) have a median savings balance of $452,000. Between 2004 and 2013 these numbers are
a 24% increase for the high income bracket and almost a 20% decrease for the
low income bracket. Even worse, only 9% of the lower income class households
even have a retirement savings account, whereas 90% of the higher income class
households have such an account.
Also, around 50% of middle class income households have a retirement
savings account.
Some people will say that this is a problem the government
needs to address quickly. Others
will argue that it’s the fault of the individuals, who need to maintain smarter
saving behavior and manage their income more efficiently.
http://money.cnn.com/2014/09/18/retirement/retirement-savings-income-inequality/index.html?iid=HP_River
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ReplyDeleteI think a good solution to this problem would be for the government to encourage saving and maybe offer incentives to people who do save. That would be a good thing because it gives people a nice safety net or rain day fund for latter. The government could increase public saving by either cutting spending or decreasing taxes to help improve this huge gap. Either way this is a serious issue that the government really needs to address in the long run.
ReplyDeleteI agree with Christopher, if the government created some incentives for people to save that will ultimately motivate them to do so. It is obvious many people don't make enough money to store away for retirement purposes thus no account is created.On the other hand, people with monetary comfortability are far more apt (90% in article) to create such an account to save for the future. The government must step in at some point because this gap doesn't have much room available for the lower class bracket.
ReplyDeleteWhether the issue of the lack of saving of adults is a problem that should be tackled by the government or the individuals themselves, what is going to be an issue in the future is unemployment. Most of the households that don't have a lot of savings will be working for the rest of their lives, and since there are more people in this situation than previously there will be more job competition in the future. Therefore, when our generation begins looking for jobs and the generation behind does the job market might be even more crowded than it is now with older people trying to stay financially stable and save.
ReplyDeleteI think John makes a good point. The number of people that are in the lower income bracket is staggering. The implications of this are obvious and as John said, the people with lower incomes and little to no retirement savings will be working for the rest of their lives. As the supply of labor increases, the unemployment rate increases as well due to the disproportionate relationship between available jobs and people looking for jobs.
ReplyDeleteAs for trying to lower the difference of savings between the lower and upper income bracket, I agree that incentives would increase the amount of savings. It is constantly said in economics - people respond to incentives. If they received higher interest rates for a retirement account, or some other positive incentive to save money, I believe a much more significant number of people would.