Undercoddled Nest Eggs

Those anticipating a revival in America's lackluster savings rate--as baby boomers head for retirement--won't be happy about a new RAND report by economist James P. Smith. His analysis of a 1993 survey of 7,600 U.S. households with a member aged 51 to 61 found both stark inequities in wealth and a surprising dearth of savings.

Most middle-aged households have modest holdings at best, reports Smith, and large segments of the over-50s have no appreciable net worth at all. "The only substantial savers," he says, "are families that are already well-off."

By far the largest wealth-holding for most households, particularly minorities, is equity in their homes. Total wealth (financial assets such as bank accounts, stocks, and bonds, plus equity in homes and other property) averages $263,760 among middle-aged white families and less than $80,000 among blacks and Hispanics. But financial assets average just $72,521 among whites and less than $13,000 among minorities.

Such averages, however, are inflated by a small number of very rich families. In the more typical median white household, financial assets amount to only $17,300--perhaps a half-year's wages. Among middle-aged black and Hispanic households, median financial resources come to only $400 or less.

Indeed, some 20% of middle-aged white families and 40% of black and Hispanic families have virtually no liquid assets. Even at the 90th percentile--just below the top 10%--financial assets total just $174,500 for whites and less than $34,000 for minorities.

In short, at a time when pension coverage among young workers is declining and Social Security benefits are headed for cutbacks, most Americans still seem to rely mainly on Social Security and pensions for a comfortable old age. "To avoid a crisis in coming decades," warns Smith, "we need to take steps now to encourage savings before the ranks of retirees explode."

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