Retirement wealth is more equitably distributed than assets that are not related to retirement, said researchers in a recent presentation. Nonetheless, they say, there are factors that affect how equitable it is.
In “The Role of Defined Benefit and Defined Contribution Plans in the Distribution of Family Wealth,” a presentation at the National Tax Association’s 113th Annual Conference by Nadia Karamcheva, an analyst at the Congressional Budget Office, and Victoria Perez-Zetune, a former Senior Research Assistant for the Federal Reserve Board who is now a PhD student at the University of Maryland, examine the distribution of retirement wealth. They look at data covering the period 1989 to 2019 to examine retirement wealth among education and income groups from a variety of vantage points and measures.
Retirement wealth was more equitably distributed than non-retirement wealth, Karamcheva and Perez-Zetune found. They noted that retirement wealth has become more concentrated over the 30 years, but still is more equitably distributed than assets not related to retirement plans.
As for retirement savings vehicles themselves, Karamcheva and Perez-Zetune found that retirement wealth in DB plans was more equitably distributed than that accumulated through DC plans. Further, they say, the decline of DB plans and the rise of DC plans could be enhancing inequitable retirement wealth distribution.
Karamcheva and Perez-Zetune found that level of education can heighten the gap in retirement wealth between families, and that effect has grown over the period. They report that they found that other factors—differential mortality, discount rate, and how the unfunded portion of DB liabilities is allocated—do not have a pronounced effect on wealth concentration.
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