Evaluating Policies to Build Retirement Assets in Economically Vulnerable Populations
(Poverty and Income Policy)
*Names in bold indicate Presenter
Building assets and making long-term investments are essential to facilitating household economic mobility, yet the distribution of assets in the U.S. population is increasingly unequal. One percent of Americans currently hold approximately a third of the total wealth in the country (Piketty, 2014) and wealth inequality is the most extreme it has been since the 1930’s (Saez and Zucman, 2016). Distressingly, low-income households are much less likely to engage in long-term investments, which oftentimes leaves them unprepared for a financially secure retirement (Federal Reserve Board, 2016).
While consumption-focused programs like Social Security play an important role in the financial lives of retired people, it is also important that retirees build assets throughout the life cycle if they are going to have a financially secure retirement. While policymakers have historically focused their antipoverty efforts on income and consumption initiatives, they have increasingly turned to asset-building programs to address the financial security of LMI populations. Although these programs have become more popular, rigorous evidence of the efficacy of these different approaches has been relatively scarce. In response, this panel presents a diverse set of papers with one focus-- to understand some of the causes of and solutions for long-term retirement savings, with a particular emphasis on low-income or economically underprivileged populations.
The first paper evaluates findings from a randomized controlled experiment of the Assets for Independence (AFI) program, a federally-supported Individual Development Account (IDA) program to help low-income households build long-term assets. Findings from AFI’s third-year follow-up indicate that the program can encourage asset building and investment behaviors over the medium-term.
The second paper describes the impact of educational interventions that promoted retirement saving among Spanish-speaking LMI individuals who do not have an employer sponsored retirement account. This study both informed participants and used behavioral nudges to encourage participants to open a retirement saving account, my Retirement Account (myRA). Findings speak to the benefit of use of techniques to best engage minorities in government savings programs.
The third paper evaluates the impacts of a tax refund savings experiment that assessed the degree to which low-income households are interested in using their tax refund to open myRAs. Its findings also speak to which behavioral economics techniques are most effective at promote account opening.
The final paper considers the future landscape of retirement savings for U.S. millennials, with a specific emphasis on the heterogeneity of retirement prospects for minority households. Findings suggest that there exists substantial disparity in expected levels of retirement-preparedness across racial and ethnic groups.
This panel illustrates challenges faced by economically vulnerable households and highlights potential opportunities to build long-term retirement savings in LMI households. The panel provides important insights to possible solutions for addressing this critical policy issue, and its papers discuss important implications for researchers and policymakers who work towards ensuring long-term economic equality and stability in vulnerable populations.