Sources of Income Inequality among Households 65 and Older: Can Individual Choice, Markets and Public Policy Increase Equality?

Abstract

This paper explores the sources of income inequality among households aged 65 and older and the extent to which individual actions, competitive markets, and public policy can improve the financial well-being of those with low income. Three different types of retirement wealth are identified on the basis that they 1) are acquired in very different ways; 2) vary in their contribution to income inequality among older households; and 3) require unique individual behaviors and public policies to increase the income that they generate. Continued labor force participation is the most effective way to increase income in retirement but opportunities offered by the labor market favor highly skilled people and are likely to increase income inequality. Income inequality is likely to be a continuing reality for households of retirement age.