For years, experts have been arguing over whether Americans are financially prepared for old age, especially after including the costs of health care and long-term care. But those debates often focus on averages (or medians), a perspective that misses a key point: While some seniors are sitting pretty, many others face a huge challenge. In other words, it isn’t just about the total housing and financial assets that older adults hold, or how much they make each year. It is about how much of that wealth and income is in the hands of a relatively few seniors.

And new research by two long-time students of financial well-being in the U.S. finds that the pattern of economic inequality in the US is as troubling—and in some respects worse—among older adults as in the overall population. Or to put it another way (and to oversimplify a bit) —rich old people are getting richer and poor old people are getting poorer.  Stephen Crystal of Rutgers University, and Dennis Shea and Adriana Reyes of Penn State found that despite Social Security, inequality is widening among older adults. Their paper was published in the latest issue of The Gerontologist.

They argue that among those 65 and older, those making less than about $26,000 (the lowest-income 20 percent) are overwhelmingly dependent on only one source of income—Social Security. In 2010, that program provided 65 percent of their total income, and another government safety-net program, Supplemental Security Income, accounted for another 7 percent. Few worked after 65, so wages accounted for only about 5 percent of their income. The annuitized value of their assets, including savings and investments, accounted for about 12 percent of their total income. As the authors say, for them, the oft-cited three-legged stool of retirement (Social Security, pensions, and investments) is really only one leg—Social Security.

The Four-Legged Stool

By contrast, the highest income 20 percent (those making about $113,000 or more), sits comfortably on a four-legged stool (which, I guess, is really a chair). Not only do they benefit from Social Security, pensions, and investments, but many are also working and receiving wages.  The authors find that only 18 percent of their income came from Social Security in 2010, while wages accounted for one-fifth, and financial assets generated nearly 42 percent.

Of all the income received by those aged 65-74, the lowest-income 40 percent received only about 14 percent, down from 17 percent in 1983-1984. By contrast, those in the top 20 percent got nearly half of all the income received by those 65-74.

The authors use an extremely broad definition of income and assets, and they allocate income from financial assets as if it is distributed annually over a person’s expected lifetime. Thus, they include unrealized capital gains—income that the wealthy people may not actually receive in cash each year.

Inequality Among Older Adults

Income inequality is receiving wide attention in this year’s presidential campaign. And it has been on the front-burner for policy wonks since 2014, when the French economist Thomas Piketty published his massive study of inequality in the developed world. But the discussion has focused mostly on working-age people, and led to policy debates about issues such as the minimum wage, more accessible college education, and the like.

Crystal and Shea have been looking at this issue for decades, as well.  But their focus in this new paper is on older adults. Their analysis is controversial. Yet, by focusing on the distribution of assets and income and not just looking at averages, they provide a different perspective than other analysts.

For example, take a look at this 2014 Wall St Journal column (paywall) by two well-known retirement experts, Andrew Biggs and Sylvester Schieber. In it they argue that “the average U.S. retiree has an income equal to 92% of the average American income.”  So, they imply. No problem.

In addition, some argue that focusing on inequality misses the mark. They say nominal income is more important in the real world than relative income. After all, I really care whether I have enough money to maintain a good standard of living in retirement, not whether you have more than me. And policymakers certainly should focus on meeting the needs of those who are being squeezed the most, rather than on redistributing retirement income from the rich to the poor.

Still, Crystal, Shea, and Reyes are doing an important service by focusing our attention on the distribution of income and assets in old age, and moving us away from the often-misleading debate about averages.