Disparities in income and wealth among older Americans have widened in recent decades. Higher income and wealth are both associated with better prospects for living a long life.
So where does this leave older Americans?
Today’s WatchBlog post looks at our new report on these trends with older Americans in retirement, as well as what we can see in three other countries with large economies – Canada, Germany and the United Kingdom.
In some ways we are similar to the countries we reviewed. In the United States and the United Kingdom, older people who have higher incomes and more wealth live longer. Additionally, in all three countries and the United States, we found that getting an education and owning a home can be critical to getting a good job and saving enough to maintain lifelong financial security.
In other ways, the countries differ significantly. For example, Germany, unlike the United States, offers long-term health insurance to its elderly citizens without spending significantly more than other countries.
The differences are greater in the United States.
For households headed by older Americans, income and wealth gaps are significantly wider than for households headed by their Canadian, German or British counterparts.
This US trend in differences has persisted over the 20-plus years of data we examined. For example, in 2007, the median, or “typical” income of high-income elderly households in the United States was about 12 times that of low-income households, compared to about 6 times in Germany and about 10 times in Great Britain .
What does this mean for our aging citizens?
We have previously shown that even the expected value of future payments from Social Security and defined benefit pension plans generally reduces wealth differentials. However, the extent to which expected benefits from defined benefit pension plans continue to reduce wealth differences between future retirees could reduce. Although defined benefit plans provide substantial financial resources to many of today’s retirees, we have reported a decades-long shift in the number of employers in the United States offering these types of plans. We also reported on steps other countries are taking to encourage savings in defined contribution plans as defined benefit plans become less available.
Find out how trends in older Americans compare to those in Canada, the UK, and Germany in our new report. You can also learn about our recent work on retirement security by viewing our retirement security topics.
