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Wonkblog | Analysis

Eric Trump says 401(k)s are doing great, but half of American families don't have one

Eric Trump, a son of Donald Trump, waits for an elevator in the lobby of Trump Tower in New York in December 2016. (Evan Vucci/Associated Press)

Appearing on Sean Hannity's show on Fox News Channel this week, Eric Trump pointed to the stellar performance of 401(k) retirement accounts as evidence that his father's economic policies were helping average Americans.

"Every single day I walked on the street and people come up to me," Trump said. "They hugged me. 'Tell your father we say thank you. You know what, I just opened up my 401(k), I haven't looked at in a year. It is up by 35 percent. I mean, I didn't think retirement was possible.'"

The stock market's performance has indeed been a boon for Americans with money in 401(k) accounts. But how much is that helping the typical worker?

Let's begin with some numbers. In 2016, according to the federal Survey of Consumer Finances, just more than half of Americans had some sort of retirement account -- a 401(k), IRA, etc. That means nearly half of American households have no dedicated retirement savings.

The share of households with retirement accounts is up considerably since 1989, but there has been little change since about 2001: For the past 15 years, the share with retirement accounts has hovered between 49 and 53 percent.

That's particularly troubling because of what the chart above doesn't include: Social Security payments or old-style defined benefit pension plans. Measures of wealth and net worth don't typically count those assets because they're not owned by people the same way a savings account or 401(k) is. If you hit a rough patch in your life, for instance, you can't simply draw down on your pension or Social Security payments the way you can with a 401(k).

The share of households with defined benefit pensions, which offer a consistent, predictable stream of income after retirement, has decreased sharply since the 1980s. In 1989, according to the Economic Policy Institute, 41 percent of families headed by someone aged 32 to 61 had one of those plans. By 2013, that number had fallen by nearly half, to 21 percent.

So the rise in retirement accounts shown in the first half of the chart above is partly a reflection of the decline of pensions: Employers began winding down defined benefit pension plans and funneled to defined contribution vehicles such as the 401(k). A steady stream of retirement income has been replaced by a lump sum of money whose performance is largely dictated by the markets.

Like so much else in today's economy, that shift has primarily benefited the wealthy. Richer households can contribute more to their retirement plans, and they can afford to hire accountants, tax professionals and money managers to maximize the returns on their investments. The result is apparent in the chart below, which traces the median value of retirement accounts by net worth percentiles.

The big story here is how the retirement assets of the top 10 percent of households, and to a lesser extent the top 25 percent, are peeling away from everyone else.

In 2016, the top 10 percent of households had an average net worth of about $2.4 million, according to the Survey of Consumer Finances. The median retirement holdings of that group worked out to well more than $600,000. In 2016 dollars, that represents a 600 percent increase since 1989.

Now let's look at the bottom 25 percent of households. They have an average net worth of just $100 (no, that's not a typo). The members of this group fortunate enough to have a retirement account have a median amount of $4,300 put away for savings. That number is higher than their average net worth for two reasons: First, it includes only the 20 percent of these households that actually have a retirement account. Second, many of these households are saddled with considerable amounts of debt that, when subtracted from their retirement savings, puts them at zero or less in terms of net worth.

Although the retirement accounts of the top 10 percent have grown more than 600 percent since 1989, those of the bottom 25 percent haven't even doubled. What we see in retirement is the same as what we see everywhere else: The richest households are leaving everyone else in the dust. American capitalism is a well-oiled machine for creating winners and losers, and the winners are taking it all.

The good news for the bottom 25 percent of those who have retirement accounts: At least they have something. A growing share of families -- more than 1 in 5 of them as of 2016 -- have basically nothing at all. Their net worth is either zero or negative, meaning their debts (mortgage, credit cards, student loans) are more than the value of their assets (home, savings, retirement accounts).

If you exclude housing assets from this calculation, which makes sense because it's not a liquid asset than you can easily tap in a pinch, the situation becomes more dire. More than 30 percent of households have zero or negative non-home assets, the highest share since at least 1962.

Going back to Eric Trump's point, a roaring year for the stock market is indeed good news for those families who are significantly invested in it. But about half of American households have no retirement savings, and many more are unable to save as much as experts say they'll need. Since 1980, the American economy has done a great job of boosting the fortunes of the top half of the population. The challenge today is figuring out how to make it work for everyone else.

Correction: An earlier version of this incorrectly framed Eric Trump's remarks on Hannity. He was characterizing what a person on the street said to him, not his own 401(k) account.

Christopher Ingraham writes about politics, drug policy and all things data. He previously worked at the Brookings Institution and the Pew Research Center.

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