The UC Berkeley Center for Labor Research and Education just released an interesting research report titled “Meeting California’s Retirement Security Challenge.”
The report has an introduction written by Jacob Hacker—a Political Science professor at Yale University.
Hacker’s introduction focuses on what he refers to as the “Great Risk Shift” and is appropriately titled “The Coming Age of Retirement Insecurity.”
The viability of defined contribution retirement plans such as the 401k is currently a topic of debate—particularly in the academic and public policy communities. Critics—including labor economist Teresa Ghilarducci—argue that the vast majority of society has been short-changed by defined contribution retirement plans.
The Hacker introduction provides quite a few data points that support this view. Some of Hacker’s points include:
- Tax breaks for retirement-related accounts such as the 401k cost the federal government $140 billion in 2011.
- Approximately 80 percent of these tax breaks accrue to the top 20 percent of the population.
- Only 7 percent of the tax breaks accrue to the bottom 60 percent of the population.
- Roughly 75 percent of 401k account holders have account balances that are less than the “widely cited” average of $60,000.
- The median balance among 401k account holders is less than $20,000.
- Only 50 percent of workers have access to a defined contribution plan and only about a 30 percent of workers contribute to such a plan.
- Overall, roughly 70 percent of 401k and individual retirement account (IRA) assets are held by the richest 20 percent of Americans.
Source: UC Berkeley Center for Labor Research and Education
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