Lifecycle Patterns of Saving and Wealth Accumulation

Feivesom, Laura J.; Sabelhaus, John

doi:10.17016/feds.2019.010r1

Cited by 4 publications

(14 citation statements)

References 52 publications

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“…Earlier research often concludes that inheritances actually reduce inequality, as they are distributed less unequally than other forms of wealth (Wolff 2002;Wolff and Gittleman 2014;Elinder et al 2018;Boserup et al 2016). In this paper, we extend the work of Feiveson and Sabelhaus (2019) allocating the value of inheritances and gifts that can be identified in the survey but are not reflected in the inheritance module. Using these augmented measures of intergenerational transfers, which capture a larger flow of transfers than the default SCF measures, we describe the racial distribution of inheritance and inter vivos transfers and assess their importance in understanding disparities in wealth by race.…”

Section: Introductionmentioning

confidence: 84%

“…Some respondents report having received property or businesses through an inheritance or gift but do not include those transfers later when the inheritance questions are asked (see Appendix A for further details). Adding those unreported inheritances and gifts raises the totals noticeably (Feiveson and Sabelhaus 2019). Inter vivos transfers pose an additional challenge, because the wording of questions about transfers made is quite different from the wording of questions about transfers received, such that transfers received are systematically lower (Feiveson and Sabelhaus 2019).…”

Section: C Inheritances and Giftsmentioning

confidence: 99%

“…The SCF collects information from respondents on receipt of inheritances and inter vivos transfers as well as the giving of inter vivos transfers. Feiveson and Sabelhaus (2019) show that inheritances received are well captured in the SCF, based on benchmarking those reported inheritances against estimated bequests. 10 One key to getting SCF inheritances and gifts received closer to aggregate benchmarks is recognizing that some inheritances and gifts are captured outside of the SCF inheritance module, particularly in the sections on real estate and business assets.…”

Section: C Inheritances and Giftsmentioning

confidence: 99%

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Racial Wealth Disparities: Reconsidering the Roles of Human Capital and Inheritance

Sabelhaus¹,

Thompson²

2022

Federal Reserve Bank of Boston Research Department Working Papers

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In this paper, we present updated measures of racial disparities in wealth using the most recent data from the Survey of Consumer Finances (SCF), augmented by household-level estimates of defined benefit (DB) pension wealth developed by Sabelhaus and Volz (2020). Including this important asset, we find that racial wealth disparities are smaller than the numbers typically discussed in other research or in the media, but the disparities remain substantial. The paper proceeds by exploring two specific factors that have long been identified as playing potentially important roles in generating disparities in wealth by race, namely differences in earnings (education/human capital) and intergenerational transfers in the form of inheritances and inter vivos gifts. We contribute to the existing literature by introducing several data innovations in the exploration of these factors using the SCF. We augment the SCF data with individuallevel lifetime earnings histories (developed by Jacobs et al. 2020Jacobs et al. , 2021 and enhanced measures of intergenerational transfers (developed by Sabelhaus 2018, 2019). We also create an expanded set of variables that reflect the range of pension coverage and generosity across workers. With all three of these new data components, we use non-parametric decomposition techniques to estimate their contributions to racial wealth gaps between white and non-white families. Differences in lifetime earnings, pension generosity, and a handful of other human capital and work-related variables explain threequarters of the white/Black wealth gap and 80 to 90 percent of the white/Hispanic gap. Reweighting white family wealth to match the distribution of human capital traits of families of "other" races (including Asian, Native American and other groups) raises counterfactual white wealth to the level of "other" family wealth, nearly closing the white/"other" gap. Differences in intergenerational transfers are found to account for 13 to 16 percent of white/non-white private wealth gaps, although much of the influence of these transfers likely works through the human capital channel. Policies that successfully increase skills, employment, earnings, and pension coverage among low-wealth Black and Hispanic families will make important contributions to closing wealth gaps.

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Section: Introductionmentioning

confidence: 84%

Section: C Inheritances and Giftsmentioning

confidence: 99%

Section: C Inheritances and Giftsmentioning

confidence: 99%

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Racial Wealth Disparities: Reconsidering the Roles of Human Capital and Inheritance

Sabelhaus¹,

Thompson²

2022

Federal Reserve Bank of Boston Research Department Working Papers

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“…Given the observed average income growth between ages 30 and 60 across the three wealth groups, those ratios translate roughly into annual saving rates of (accumulation of SSW relative to income) of 15, 12, and 5 percent as we move from the lowest to highest wealth groups. In that sense, low and middle wealth families are saving a much larger fraction of their income than what is suggested by conventional saving measures (Feiveson and Sabelhaus, 2019). One could say that low and middle wealth families just save differently than high wealth families, by participating in Social Security.…”

Section: Introductionmentioning

confidence: 95%

Social Security Wealth, Inequality, and Lifecycle Saving

Sabelhaus¹,

Volz²

2020

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Wealth inequality in the US is high and rising, but Social Security is generally not considered in those wealth measures. Social Security Wealth (SSW) is the present value of future benefits that an individual will receive less the present value of future taxes they will pay. When an individual enters the labor force, they generally face a lifetime of taxes to pay before they will receive any benefits, and thus their initial SSW is generally low or negative. As an individual works and pays into the system their SSW grows and generally peaks somewhere around typical Social Security benefit claim ages. The accrual of SSW over the working life is most important for lower-income workers because the progressive Social Security benefit formula means that taxes paid while working are associated with proportionally higher benefits in retirement. We estimate SSW for individuals in the Survey of Consumer Finances (SCF) for 1995 through 2016 and use a pseudopanel approach to empirically demonstrate those lifecycle patterns. We also show that including SSW in a comprehensive wealth measure generally reduces estimated levels of wealth inequality but does not reverse the upward trend in top wealth shares.

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“… See Bricker et al (2017) for a discussion of the SCF and the most recent results, for survey year 2016. 9 SeeFeiveson and Sabelhaus (2019),Bricker et al (2016), andBatty et al (2019) for a discussion of how well the SCF captures macro aggregates over time, and how the SCF results on wealth distribution compare to other studies based on a straight read of the administrative data. Another key but often neglected advantage to using the SCF is the extensive interconnectedness between income and balance sheet components in the survey instrument that greatly improve data quality.…”

mentioning

confidence: 99%