Recent studies have shown that wealth inequality in the United States has risen in the past several decades. However, our research finds that when Social Security benefits are included, the wealth share of the top 1 percent rose from 22 percent in 1989 to slightly under 24 percent in 2019—a much smaller increase than conventional measures suggest. Wealth remains highly concentrated at the top, but not substantially more than in 1989.

Previous wealth inequality studies have focused on marketable assets, such as stocks, bonds, and real estate, but they exclude Social Security benefits, even though these future payments represent significant wealth for most American households. To address this oversight, we estimated Social Security wealth by simulating households’ future benefits and payroll taxes using data from the Survey of Consumer Finances. Our estimates focus on Social Security’s old-age retirement program only; including disability insurance would reveal even less growth in inequality. For current retirees, we calculated Social Security wealth by valuing reported benefits as a lifetime annuity. For workers still in the labor force, we simulated earnings trajectories and then estimated these households’ future retirement benefits.

To value future benefits, we had to choose appropriate discount rates since payments received decades in the future are less valuable than benefits received today. First, we used Treasury yields to discount future benefits as if they carried no risk. Using this approach, the wealth share of the top 10 percent increased by only 1 percentage point between 1989 and 2019, while the share of the top 1 percent grew by 1.5 percentage points. By contrast, measures of marketable wealth, which exclude Social Security benefits, show increases of 9.5 percentage points for the wealth share of the top 10 percent and 6.4 percentage points for the wealth share of the top 1 percent.

Social Security benefits, however, carry several risks. First, Social Security is wage indexed, which means the benefits of future retirees are tied directly to economic growth. When we adjusted for this economic uncertainty, Social Security wealth decreased by approximately 11 percent. This adjustment most heavily affects younger workers in the bottom 90 percent of the wealth distribution, as they face the greatest uncertainty about future economic growth because they are furthest from retirement. With this risk adjustment, the wealth share of the top 10 percent and top 1 percent increased by 1.7 and 1.9 percentage points, respectively.

Future Social Security benefits are also put at risk by uncertain government policy. Without reform, the United States is now less than a decade away from being unable to pay out Social Security benefits in full. We included this risk in our valuation of Social Security benefits by assuming the worst scenario in the Social Security Administration’s projections: a 40 percent cut to all benefits, which would decrease the amount of Social Security wealth by 28.3 percent. Even under this assumption, wealth concentration increased less than measures of marketable wealth suggest: 4.3 percentage points for the top 10 percent and 3.4 percentage points for the top 1 percent.

We also examined whether households value Social Security benefits below their fair market value since these benefits cannot be sold for cash today. Applying an aggressive 3‑percentage-point additional discount cut Social Security wealth in half. We did not apply similar discounts to illiquid marketable assets, such as private businesses, which wealthy households often own. Even with this extreme assumption, including Social Security benefits substantially reduces measured growth in wealth inequality.

Social Security has such a large effect on inequality trends because growth in Social Security wealth has outpaced growth in marketable wealth over the past three decades. This increase can be attributed to three factors. First, Social Security has expanded: The share of earnings subject to Social Security payroll taxes increased from a maximum of 1.25 times average annual earnings in 1989 to 2.5 times in 2019. Second, there have been demographic shifts: The US population is aging and living longer. The share of workers near retirement age and for whom Social Security wealth is at its peak (i.e., they have paid fully into the fund but have yet to receive any benefits) grew by nearly 50 percent between 1989 and 2019. Life expectancy also increased by nearly four years during the same time period. Third, and most importantly, real interest rates have fallen. This means that investors in 2019 would have had to save considerably more or buy a higher-priced annuity than an investor in 1989 to fund the same level of consumption during retirement. In other words, saving has become less valuable, so the value of future Social Security benefits has risen. While most analyses focus on how falling rates increased stock and bond prices held by wealthy households, they overlook the parallel increase in Social Security wealth. This omission is significant: Social Security benefits made up nearly half of total wealth for US households in the bottom 90 percent of the distribution in 2019.

Our findings indicate that previous studies have overstated growth in US wealth inequality. The true increase may be even smaller, as we excluded other government benefits such as disability insurance and Medicare that primarily benefit households with less wealth. Accurate measures of wealth inequality are important because they indicate inequality of consumption and well-being for retirees. Additionally, understanding the evolution of inequality across countries requires considering differences in pension systems. Failure to do so distorts our understanding of inequality trends. For example, proposals to let American workers invest part of their Social Security contributions in personal retirement accounts would reduce measures of private wealth inequality, regardless of their effect on total wealth inequality. Finally, accurate measures of wealth inequality help policymakers evaluate the role of redistributive public programs in curbing inequality.

NOTE
This research brief is based on Sylvain Catherine et al., “Social Security and Trends in Wealth Inequality,” Journal of Finance 80, no. 3 (June 2025): 1497–1531.