401(k)s are replacing pensions. That’s making inequality worse.
By Lydia DePillis,
The once-dominant defined benefit pension plan–which pays out a fixed amount after an employee retires–is on its way to becoming an historical artifact. More and more employers are offering 401(k) plans instead, which require employees to pay into their own accounts, sometimes with and sometimes without a matching contribution. And according to a new analysis from the labor-oriented Economic Policy Institute, the effect has been a stratification of retirement savings by education, income, and race–which could deepen inequality among the elderly as the population ages.
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But the moral starts to change as you look underneath the numbers. Those benefits split among a smaller share of the population: Overall, the percentage of workers participating in all employer-based retirement plans declined over the past couple decades, across all age groups.
That’s because the top-earning people are choosing to put a lot more money away, while those who earn less can’t afford to. Retirement savings by the top fifth of income earners have risen markedly, while they’ve declined or risen only slightly for most everyone else.
more, with charts
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/03/401ks-are-replacing-pensions-thats-making-inequality-worse/
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