Why Do Late Boomers Have So Little Wealth and How Will Early Gen Xers Fare?

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Anqi Chen, Alicia H. Munnell, and Laura D. Quinby, Boston College

Recent decades have seen a shift from defined benefit pensions to defined contribution (DC) plans, a rise in Social Security’s Full Retirement Age, and a drop in house values during the Great Recession. Hence, while younger cohorts were expected to reach retirement with less wealth from pensions, Social Security, and housing, increasing DC balances were predicted to offset the gap. However, the numbers for the most recent cohort in the Health and Retirement Study (HRS) – the Late Boomers – show not only the expected declines but also an unexpected drop in 401(k)/IRA assets for all but the top wealth quintile.

The question is why Late Boomers have so little 401(k)/IRA wealth; how the trends vary by race/ethnicity; and what the pattern implies for Early Gen Xers, who are nearing retirement. This project will examine trends in wealth by quintile and race/ethnicity in the HRS and use Oaxaca-Blinder decomposition to evaluate the factors depressing Late Boomer wealth. Potential explanations include a weak labor market during the Great Recession and demographic changes such as the decline in marriage. It will then consider the implications for Early Gen Xers.