"Including Social Security and retirement wealth in the wealth concept results in significantly lower top shares and less growth in the concentration of wealth."

Wealth Concentration in the United States Using an Expanded Measure of Net Worth. Lindsay Jacobs, Elizabeth Llanes, Kevin Moore, Jeffrey P. Thompson, and Alice Henriques Volz. Federal Reserve Bank of Boston, Research Department Working Paper 21–6. Jul 2021. https://www.bostonfed.org/publications/research-department-working-paper/2021/wealth-concentration-in-the-united-states-using-an-expanded-measure-of-net-worth.aspx

Abstract: Defined benefit (DB) pensions and Social Security are two important resources for financing retirement that are often excluded from data, resulting in incomplete measures of wealth and representations of household wealth concentration. In this paper, the authors estimate an expanded measure of wealth that includes DB pensions and future Social Security benefits and show how that inclusion affects estimates of wealth inequality in the United States as well as trends over time. They further illustrate the impact Social Security has on these measures by simulating distributions under a scenario in which expected future Social Security Trust Fund shortfalls are addressed through a reduction in benefit payouts.

Key Findings

Even for the median household in the wealth distribution, the present value of defined benefit (DB) pensions and Social Security benefits accounts for more than half of all wealth.

Including DB pensions and Social Security benefits in measures of wealth results in markedly lower wealth concentration and moderates trends toward higher wealth inequality over time.

More specifically, the “90/50 ratio”—the ratio of wealth held by those at the 90th percentile of wealth to those at the 50th percentile—is reduced by nearly half for the 50–59 age group (from 13.4 to 6.8 in 2019) and for the 40–49 age group (10.7 to 6.4) when the estimated value of Social Security benefits are included in measures of wealth.

The “50/10 ratio” falls from 13.1 to 4.3 among those aged 40 to 49 and from 21.3 to 4.2 for the 50–59 age group when Social Security benefits are included.

The share of wealth held by the top 5 percent of the distribution drops from about 72 percent to 51 percent when the value of defined contribution (DC) plans and DB pensions are included in measures of wealth; it falls even further, to 45 percent, when Social Security benefits for those aged 40 to 59 are included.

Simulations of a policy scenario that reduces Social Security benefits to 75 percent of current benefit levels increases, by various measures, the share of wealth held at the upper end of the distribution