The Census Bureau released a report the other day on Americans’ wealth that seemed full of bad news. Middle-class wealth was down, and inequality — the gap between the top and everyone else — was up. Stereotypes seem confirmed. But wait. Buried in the bad news was some astonishing good news: The elderly defied trends and got wealthier.
This is a big deal. People save for retirement; it’s the main savings motive for many (possibly most) households. If the elderly are getting wealthier, it suggests that, by their 60s, many Americans have changed their behavior to compensate for earlier undersaving or overspending. The so-called “retirement crisis” looks overblown.
The Census report examined Americans’ net worth from 2000 to 2011. Net worth consists of people’s assets (homes, retirement accounts, stocks, bonds) minus their debts. The report’s main findings are undeniably discouraging. They describe a society in which wealth is becoming increasingly stratified along economic, racial and ethnic lines.
Consider: From 2000 to 2011, the net worth of the median household — the one precisely in the middle — dropped $5,046, or 6.8 percent. Meanwhile, the median net worth of the richest fifth of Americans rose $61,379, or 10.8 percent. (All these figures are adjusted for inflation and expressed in 2011 “constant” dollars. Note also that report does not deal with annual income.)
By the Census study, the wealth gap isn’t just between the top 1 percent and everyone else. Rather, the wealthiest two-fifths are pulling away from the rest: They enjoyed gains in net worth, while the poorest three-fifths did not. Many in the top two-fifths are comfortable but hardly super-rich. In 2011, the median net worth of people in the second fifth was $205,985; the median in the top fifth was $630,754.
The growing gap has been attributed to many causes. The financial crisis, it’s said, hit the poor and lower middle class hardest, forcing them to stop saving or to sell assets to cover everyday expenses. Another theory is that the prices of stocks — with ownership concentrated in richer households — have recovered more rapidly than the prices of homes, which dominate middle-class wealth. Or people at the top may have managed their money better.
Whatever the causes, the effects are widespread. Wealth gaps expanded between groups and within groups. Take African Americans. The richest 20 percent did exceptionally well. From 2000 to 2011, their net worth rose $88,353 or 63 percent — a gain exceeding the increase for the richest fifth of non-Hispanic whites. But the result was higher inequality: The gap between the wealthiest African Americans and middle-income and poor African Americans grew.
At the same time, the gap also grew between blacks and non-Hispanic whites in the middle. Here’s why: From 2000 to 2011, the median net worth of whites stayed the same, while it dropped 40 percent for blacks. In 2000, the median net worth of whites was 10.6 times that of blacks; by 2011, whites’ advantage was 17.5 times greater.
Not an uplifting picture.
But it’s also incomplete.
The elderly — those 65 and older — are the glaring exception to these trends. In contrast with other groups, their wealth rose significantly. The gain in median net worth was 17 percent, from $146,205 to $170,516.
Although inequality worsened, the increase was modest. Among the richest fifth of the elderly, net worth increased to $899,608 from $741,210. Only the poorest fifth experienced no increase, and their net worth in 2000 was so low ($1,341) that even a doubling wouldn’t have made much difference.
Just what caused this startling generational difference is unclear. As retirement approached, many people may have gotten religion about saving more and spending less. They may have paid down debt — a form of saving — faster than others. Or they may have much more equity in their homes. About four-fifths of the elderly own homes.
What’s discouraging is that greater wealth inequality seems heavily age-related. Indeed, the largest drops in net worth occurred among households in their 20s, 30s and early 40s. But it’s also encouraging: They may have time to make up lost ground.
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