Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36 Page 37 Page 38 Page 39 Page 40 Page 41 Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58 Page 59 Page 60 Page 61 Page 62 Page 63 Page 64 Page 65 Page 66 Page 67 Page 68 Page 69 Page 70 Page 71 Page 72 Page 73 Page 74 Page 75 Page 76 Page 77 Page 78 Page 79 Page 80 Page 81 Page 82 Page 83 Page 84 Page 85 Page 86 Page 87 Page 88 Page 89 Page 90 Page 91 Page 92 Page 93 Page 94 Page 95 Page 96 Page 97 Page 98 Page 99 Page 100 Page 101 Page 102 Page 103 Page 104 Page 105 Page 106 Page 107 Page 108CH APTER 3 63 current retirees because a large proportion of the current HRS cohorts’ wealth is already in the form of annuities (i.e., Social Security and defined-benefit plans are more important than 401(k)s in older cohorts). This situation is likely to change as younger cohorts reach older age with a higher fraction of wealth in defined- contribution accounts (Dushi and Webb 2004). Wealth and Its Distribution Income is an important component of old-age security, but the most critical determinant of post-retirement well-being may be the accumula- tion of wealth. For many older people, wealth may be the primary source of support after sources of TBL. 3-1 Social Security Benefit Acceptance, by age and retirement status: Data from the 1990s Notes: Data are from the first 4 waves of the HRS, from 1992 through 1998. Benefit acceptance excludes respondents who had ever received Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) before age 65. Source: Gustman and Steinmeier 2000a. Age 62 63 64 65 Percentage Accepting Benefits Not Retired 12% 22% 20% 42% Partially Retired 65 77 80 90 Completely Retired 70 84 89 92 Percentage of Acceptors for Whom Acceptance was Optimal Not Retired 4% 9% 9% 36% Partially Retired 13 24 23 64 Completely Retired 17 29 38 66 income, such as earnings from work, are no longer available. This chapter discusses wealth in terms of financial “net worth,” which is a combination of four different types of wealth: the value of one’s home(s) after deducting mortgages or other home equity debt; the value of IRAs; investments in stocks and bonds; and the value of other assets, including businesses or farms, real estate, check- ing accounts, CDs, transportation, and other items, again after deducting “negative assets” in the form of debt. This definition of net worth includes traditional measures of wealth but does not include entitlements to Social Security or the value of fu- ture pension income. (A more complete estimation of wealth that includes those items is described in the box on page 66.) The 2002 HRS data reveal enormous inequality in older adults’ wealth, even more than was described earlier with regard to income. As shown in Figures 3-6 and 3-7, regardless of age and marital status, HRS participants in the lowest quintile for net household worth have very low net worth. Indeed, average net worth for unmarried respondents in the lowest quintile is negative for all but the 75 to 84 age group. In stark contrast, married households in the highest wealth quintile have net worth averag- ing nearly $1.5 million, roughly six times the net worth (about $250,000) of those in the middle group. The findings are similar for unmarried households, with the average net worth of the high- est wealth quintile being approximately $800,000. Among unmarried households, however, the relative difference between high and middle is even greater than that for married households (i.e., a ratio of about 10 to 1). While the value in 2002 of homes, IRAs, stocks and bonds, and other assets was exponentially greater in the wealthiest group, the composition, magnitude, and distribution of wealth is in fact broadly similar across age categories. For both married and unmarried participants, net worth is somewhat greater in the 65 to 74 and 85 and older age groups. The value of one’s home is the most important component of wealth in a major- ity of U.S. households. In the lower four wealth quintiles, the value of one’s home is greater than any other single component (except among unmar- ried people in the lowest quintile, for whom home wealth is negative). Net worth in stocks and bonds is greater than savings in targeted retirement plans such as IRAs and 401(k)s, although the latter have become increasingly important over time. Married participants consistently report more retirement- plan wealth than do their unmarried counterparts, although the amounts are quite small or nonexis- tent among people age 85 and older.