The rich get richer and the poor get poorer

Please join us in calling on Congress to expand—not cut—Social Security.

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To: Congress

New research shows that a shift from defined-benefit retirement plans (pensions) to defined-contribution plans (401(k)s) is exacerbating income inequality and poorly preparing the majority of Americans for their retirement.

The policy solution is to protect and expand Social Security, not cut benefits for millions of Americans. Please, stand with the American people by passing legislation that expands Social Security for current and future generations.


Over the last several decades, employers have moved away from pension-based retirement plans toward the 401(k) savings model. Participation in these do-it-yourself retirement savings plans is highly unequal across income groups because the system is stacked against those who can least afford to contribute and to bear investment risks. Lower-income workers get skimpier matching contributions from employers and often receive little or no tax benefit, but still face a penalty if they need to tap their savings early.

According to new research by the Economic Policy Institute, 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 (see the first figure below).

Additionally, families in the top income fifth accounted for 63 percent of total income, but 74 percent of total savings in retirement accounts (see the second figure below) illustrating the degree to which 401(k)s favor those with higher incomes.

High-income families are 10 times as likely to have retirement accounts as low-income families: Share of families age 32–61 with retirement account savings by income quintile, 1995–2013

1st (Bottom) 2nd (Lower-middle) 3rd (Middle) 4th (Upper-middle) 5th (Top)
1995 10% 33% 50% 68% 79%
1998 15% 38% 57% 69% 83%
2001 17%   40%   56%   77%   89%  
2004 9% 37% 53% 74% 84%
2007 12%  34%  59%  76%  90% 
2010 12% 36% 53% 68% 86%
2013 8%  30%  52%  69%  88% 
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The data below can be saved or copied directly into Excel.

Note: Retirement account savings include 401(k)s, IRAs, and Keogh plans. Family-income quintiles are based on "normal income," a measure that ignores temporary fluctuations and is not available for years prior to 1995.

Source: EPI analysis of  Survey of Consumer Finance data, 2013.

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401(k)s magnify inequality: Share of total retirement account savings and total income for families age 32–61 by income quintile, 2013

Retirement account savings Income
1st (Bottom) 0% 2%
2nd (Lower-middle) 1% 5%
3rd (Middle) 5% 10%
4th (Upper-middle) 20% 19%
5th (Top) 74% 63%
ChartData Download data

The data below can be saved or copied directly into Excel.

Note: Based on "normal income," which may differ from actual income if a family's income in the past year was unusually high or low. Retirement account savings include 401(k)s, IRAs, and Keogh plans.

Source: EPI analysis of  Survey of Consumer Finance data, 2013.

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This disparity across income groups highlights a serious policy failure that is exacerbating income inequality as well as the existing retirement security crisis with two-thirds of seniors relying on Social Security for a majority of their income.

The policy solution to the retirement security crisis is to protect and expand Social Security for millions of Americans, not cut our only universal guaranteed source of retirement income.