(Washington, D.C.) A just-released report by the Center for Effective Government and the Institute for Policy Studies, A Tale of Two Retirements, is the first to provide detailed statistics on the staggering gap between the retirement assets of Fortune 500 CEOs and the rest of America.
The report’s major finding: just 100 CEOs have as much in their company retirement assets as the entire retirement savings of 41 percent of American families (50 million families total). The report comes on the heels of a Social Security Administration announcement that beneficiaries will not receive a cost of living increase in 2016.
Additional key findings from A Tale of Two Retirements:
More on the top 100
- The 100 largest CEO retirement accounts are worth an average of more than $49.3 million—enough to generate a $277,686 monthly retirement check for each executive for the rest of their lives.
- David Novak of YUM Brands (who was CEO in 2014 and has since become Executive Chairman) had the largest retirement nest egg, with $234 million. Hundreds of thousands of YUM employees at Taco Bell, Pizza Hut, and KFC have no company retirement assets whatsoever.
Special tax-deferred compensation accounts
- Fortune 500 CEOs have $3.2 billion in special tax-deferred compensation accounts that are exempt from the annual contribution limits imposed on ordinary 401(k)s.
- In 2014, these CEOs saved $78 million on their tax bills by putting $197 million more in these tax-deferred accounts than they could have if they were subject to the same rules as other workers. These special accounts grow tax-free until the executives retire and begin to withdraw the funds.
- Fifteen CEOs of major federal contractors can expect to receive monthly retirement checks that are larger than President Obama is set to receive.
- David Cote of Honeywell has the largest retirement account, with $168 million. This will deliver him a monthly check of more than $950,000—56 times larger than the $16,975 monthly check President Obama will receive.
Gender and race gaps
- The 10 largest CEO retirement funds—all held by white males—add up to $1.4 billion, compared to $280 million for the 10 largest held by female CEOs, and $196 million for the 10 largest held by CEOs who are people of color.
- Among ordinary Americans, 62 percent of working age African-Americans and 69 percent of Latinos have no retirement savings, compared to just 37 percent of white workers.
“The CEOs’ extraordinary nest eggs are not the result of extraordinary performance,” notes Scott Klinger, director of Revenue and Spending Policies at the Center for Effective Government. “They are the result of rules intentionally tipped to reward those already on the highest rungs of the ladder.”
“The CEO-worker retirement divide has turned our country’s already extreme income divide into an even wider economic chasm,” says Sarah Anderson, Institute for Policy Studies Global Economy Project director. “And what few realize is that the trends of expanding CEO pensions and increasing worker retirement insecurity are inextricably linked.”
The percentage of private sector workers covered by a defined benefit pension, which guarantees monthly payments, has dropped from 35 percent in the early 1990s to 18 percent last year. Nearly half of all working age Americans have no access to any retirement plan at work.
The report examines various policy shifts that have favored corporate executives and identifies reforms to limit CEO retirement subsidies and ensure a dignified retirement for ordinary Americans.
The full 30-page report and related graphics are available at: https://ips-dc.org/tale-of-two-retirements/
Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies (IPS-DC.org). She has co-authored 22 IPS annual reports on executive compensation and regularly contributes commentaries on this issue to Fortune.com, Huffington Post, CNBC.com, and other publications. Contact: firstname.lastname@example.org, 202 787-5227.
Scott Klinger is Director of Revenue and Spending Policies at the Center for Effective Government. He crafted the first shareholder proposals on executive pay while working as a social investment portfolio manager. Scott is a CFA charterholder. Contact: email@example.com
This is Anderson and Klinger’s third joint report on executive retirement assets. Previous reports have received coverage in the Washington Post, CNN Money, Los Angeles Times, and Fortune, among other outlets.