In a new paper from the American Enterprise Institute, Andrew Biggs and Sylvester Schieber argue that workers retirements are more secure financially than some suggest. In part, they point to the ratio of household assets to wage earnings for those with heads aged 45-54. While their criticisms may have some validity, there are some significant omissions that cut the other way. On balance, it is likely that most households will rely more heavily on Social Security to support their retirements than in prior years.
According to the Survey of Consumer Finances, on average household wealth for the 45-54 age group fell from 5.8 years of wages in 2007 to 4.7 in 2013. Household wealth here— consistent with Biggs and Schieber—includes the value of a home and any other real estate, plus financial wealth. Mortgages and other debt are subtracted to get this number, as seen in Figure 1.
Figure 1: Biggs and Schieber’s mean assets relative to household wage income: all 45-54 year old householders
At 5 percent interest, this wealth could replace only 23.4 percent of current wage income compared to 28.8 percent in 2007.1
