Low-Wealth Retirees Face a Quintuple-Bogey

December  4, 2021

The focus of public policy on remedying income deficiencies becomes increasingly inadequate as consumers move into retirement. Successful retirement requires adequate wealth. While it is difficult to formulate useful policies that would reduce wealth deficiencies, public policy should recognize the bogeys faced by low-wealth retirees.

Their first bogey is that they have so little wealth. At the end of the second quarter of this year, the 50% of consumers with the lowest amount of wealth held $3.03 trillion whereas the 1% of consumers with the most wealth had $43.27 trillion. This and the bogey’s that follow are based on the table below.

Their second bogey is that wealth inequality has been growing. Between the third quarter of 1989 – the earliest date for which wealth data are available from the Survey of Consumer Finances -- and the second quarter of 2021, the wealth of the lower half of wealth holders rose by 304% whereas the wealth of the top 1% rose by 800%.

Their third bogey is that most of their wealth is in real estate, which doesn’t generate returns that are convertible by retirees into spendable funds. A partial though potentially important exception is reverse mortgages, which are part of bogey 5.

Their fourth bogey is that the concentration of their wealth in real estate has increased over time, whereas the concentration for higher-wealth consumers has declined.

Their fifth bogey is that the facilities available to low-wealth retirees to convert their limited wealth into spendable funds are unjustifiably deficient. The major deficiency is lack of integration between financial asset management, annuities, and reverse mortgages. A second deficiency is lack of effective competition in the markets for annuities and reverse mortgages. These result in lower spendable funds available to low-wealth retirees. I have written about these deficiencies, and how to fix them, in Integrating Retirement Plans - It Is Long Since Overdue.

How rate of return on assets affects your retirement

Source: Federal Reserve Board’s Survey of Consumer Finances 


In or near retirement? The Professor’s Retirement Funds Integrator (RFI) might enhance your life during retirement.

Want to shop for a Reverse Mortgage from multiple lenders?

Sign up with your email address to receive new article notifications