Income Distribution
How Will Recent Patterns of Earnings Inequality Affect Future Retirement Incomes?
Research Report
Karen Smith, The Urban Institute
May 2003
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Over the past three decades, the distribution of family income has become increasingly less equal. Thus, it seems reasonable to infer that retirement income inequality of future retirees also will increase. In this AARP Public Policy Institute Issue Paper, Karen Smith of the Urban Institute uses the Dynamic Simulation Income Model (DYNASIM3) to analyze the impact of recent patterns of rising earnings inequality on the retirement incomes of aged cohorts over the next four decades.
The projections show that the recent increases in earnings inequality will translate into modest increases in retirement income inequality throughout most of the income distribution. It also points out that many historically disadvantaged groups remain vulnerable to poverty. These include the oldest retirees, those with less education, and individuals without access to spousal Social Security benefits. These projections demonstrate how the complex interactions among recent earnings patterns of men and women, marriage and divorce, mortality, and Social Security policy affect the future distribution of retirement benefits. (65 pages)
Pub ID: 2003-06