Economic inequality, especially among Blacks and Hispanics, ultimately leads to financial insecurity in retirement that is made worse by a shift from pensions to individual 401(k) savings accounts.

That’s the conclusion of a new report released Sept. 1 by the National Institute on Retirement Security (NIRS), a non-profit research organization based in Washington, D.C.

Even though the Gen X and Millennial generations are more diverse, whites continue to dominate when it comes to accumulating financial assets. Among those generations and Baby Boomers, Black and Hispanic Americans own small percentages of financial assets, according to NIRS.

“A retirement system built around the individual ownership of financial assets can’t provide retirement security for many if the ownership of financial assets is concentrated among the few,” said Tyler Bond, an NIRS researcher who wrote the report based on studies conducted in 2004, 2010, 2016, and 2019.

White Baby Boomers owned more than 90 percent of that generation’s financial assets, while Black or Hispanic Boomers owned 3 percent or less for the period studied. White Gen Xers owned roughly four-fifths of that generation’s financial assets in each of the four survey years included in the research. And white Millennials owned three-fourths of its generation’s financial assets in 2019.

“This stark inequality is even more problematic because the U.S. has largely shifted to a retirement system built around in 401(k) or IRA accounts rather than pensions. (Having) few financial assets during one’s working years translates into retirement insecurity later in life,” Bond said.

He also noted “an alarming reality for Blacks and Hispanics. Not only do they hold a small share of financial assets across generations, that share is falling in some cases. Absent serious policy changes, Blacks and Hispanics aren’t positioned to improve their economic and retirement outlook.”

Other report findings:

• Inequality in the ownership of financial assets deepens over time. The top 5 percent of Baby Boomers by net worth owned a greater percentage of that generation’s financial assets in 2019 (58 percent) than in 2004 (52 percent).
• Inequality in financial assets is consistent across generations. In 2019, the top 25 percent by net worth of Millennials, Generation X, and Baby Boomers owned three-quarters or more of their generations’ financial assets.
• Mean and median financial assets were significantly higher for white households in 2019 than for Black or Hispanic households.

According to NIRS, potential solutions include strengthening and expanding Social Security, protecting pensions, increasing access to savings-based plans for low-income workers, and reforming retirement tax incentives.

The NIRS studied data from the Federal Reserve’s Survey of Consumer Finances. Household assets that were part of the data included liquid and quasi-liquid assets, certificates of deposit, directly held pooled investment funds, stocks, bonds, savings bonds, whole life insurance, and other managed assets. Phyiscal assets such as a home or a car weren’t included.

NIRS membership includes financial services firms, employee benefit plans, and trade associations. More information is available at www.nirsonline.org.