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Increasing Risks, Costs, and Retirement Income Inequality

Increasing Risks, Costs, and Retirement Income Inequality <p>Over the past three decades, retirement inequality has grown more serious for both low-income and middle-income families. Both slow wage growth and modest (to no) upward economic mobility have made it hard for people to save for their retirement. At the same time, economic risks have become more widespread and many costs have risen, making it harder for families to save. Key risks include earnings instability, the growth of defined contribution retirement savings accounts, home equity as a retirement savings vehicle, and unpaid family caregiving. Each of these risks creates its own obstacles for families to save for their future. Families also face rising costs, especially for healthcare and education that put additional pressures on their budgets and make it harder for them to put money away for the future. We summarize the evidence on the link between key risks and costs, on the one hand, and household savings, on the other. They remain understudied contributors to retirement income inequality, however. We thus point to a number of open research questions. Answering these questions could provide better insights on the distribution of the relevant risks. These answers will give policymakers a sense of the target audiences if they want to create more economic stability prior to retirement. They could also offer more evidence on the causal mechanisms by which more income volatility lowers retirement savings. This could further help identify pathways for new policy interventions to help people save more for their retirement.</p> http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Annual Review of Gerontology & Geriatrics Springer Publishing

Increasing Risks, Costs, and Retirement Income Inequality

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Publisher
Springer Publishing
Copyright
© 2020 Springer Publishing Company
ISSN
0198-8794
eISSN
1944-4036
DOI
10.1891/0198-8794.40.69
Publisher site
See Article on Publisher Site

Abstract

<p>Over the past three decades, retirement inequality has grown more serious for both low-income and middle-income families. Both slow wage growth and modest (to no) upward economic mobility have made it hard for people to save for their retirement. At the same time, economic risks have become more widespread and many costs have risen, making it harder for families to save. Key risks include earnings instability, the growth of defined contribution retirement savings accounts, home equity as a retirement savings vehicle, and unpaid family caregiving. Each of these risks creates its own obstacles for families to save for their future. Families also face rising costs, especially for healthcare and education that put additional pressures on their budgets and make it harder for them to put money away for the future. We summarize the evidence on the link between key risks and costs, on the one hand, and household savings, on the other. They remain understudied contributors to retirement income inequality, however. We thus point to a number of open research questions. Answering these questions could provide better insights on the distribution of the relevant risks. These answers will give policymakers a sense of the target audiences if they want to create more economic stability prior to retirement. They could also offer more evidence on the causal mechanisms by which more income volatility lowers retirement savings. This could further help identify pathways for new policy interventions to help people save more for their retirement.</p>

Journal

Annual Review of Gerontology & GeriatricsSpringer Publishing

Published: Jul 26, 2020

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