In the Republican presidential debate last week, the issue of income inequality came up with surprising frequency. Why that happened is worthy of its own column; for now, let's explore the issue with some recent data. Specifically, I want to consider inequality in the funding of our collective retirements.
As a nation, we do a rather mediocre job preparing for the day we stop working. We under-fund Social Security, a program originally developed to combat poverty among older Americans. As individuals, we fail to save enough to fund our own secure retirements.
Forget for a moment the debate as to whether Social Security will be around (it's easily made solvent). At present, Social Security benefits average $15,700 a year, far below what most people need to replace the median U.S. salary of $53,657.
Then consider:
• Half of U.S. workers lack company-sponsored retirement plans.
• Only 45 percent of businesses with fewer than 100 employees offer 401(k)s.
• Those who work part time, or switch jobs frequently, or work at a small company are less likely to have an employer-sponsored retirement plan.
It's not just that the U.S. retirement situation is bad; it's that it's trending in the wrong direction.
At the opposite end of the spectrum are the retirement plans of chief executives. As a group, not surprisingly, they are doing exceedingly well. Why well-paid executives get a better tax deal than rank-and-file workers is not much of a surprise: They are the ones who can afford the lobbyists who insert these special dispensations into the tax code. So while we are debating income inequality, we should also be thinking about retirement inequality.
Perhaps most vulnerable are the millennials, who came of working age in the midst of the Great Recession. There are 68 million wage-and-salary workers without a company-sponsored retirement plan, according to the Employee Benefit Research Institute. Millennials make up a disproportionate share of workers without a 401(k).
This is unfortunate: Patrick O'Shaugnessy noted in his book Millennial Money that as investors, millennials are planning for retirement in 40 to 50 years. Never again in their lifetimes will they have such a long-time horizon.
We have a looming retirement crisis. I have yet to hear a coherent solution from anyone from either party.
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Barry Ritholtz, a Bloomberg View columnist, is the founder of Ritholtz Wealth Management and a consultant at and former chief executive officer for FusionIQ, a quantitative research firm.
Editorial on 11/02/2015