A Tale of Two Retirements

Two RetirementsCoverThis report, co-published by the Institute for Policy Studies and the Center for Effective Government, is the first to provide detailed statistics on the staggering gap between the retirement assets of Fortune 500 CEOs and the rest of America.

See shareable graphics below.

Key findings:

The Top 100

  • The company-sponsored retirement assets of just 100 CEOs add up to as much as the entire retirement account savings of 41% of American families (50 million families in total).
  • 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 had the largest retirement nest egg in the Fortune 500 in 2014, with $234 million, while hundreds of thousands of his Taco Bell, Pizza Hut, and KFC employees have no company retirement assets whatsoever. Novak transitioned from CEO to Executive Chairman in 2015.

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.

Government Contractors

  • 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 report also 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.

Read the full report here [PDF].

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  • John Schlatter

    A question for the authors. If you took the $49 billion amassed by the top 100 CEOs and redistributed it to the 50 million families cited in your report, how much would each family receive?

    • David W

      $980 each. Seems like the math in this is a bit off or at the least skewed somehow.

      • Steve

        It’s $980 each, but the $50B only considers the top 100 CEOs… That pool is much deeper, but the point is to demonstrate the imbalance and hypocracy…

  • MarkShearer

    So let me get this straight. Congress can tinker with marginal tax rates all they want in an attempt to make taxes progressive and fair, but high-income executives can side-step the entire process by deferring unlimited amounts of their pay until they retire? Brilliant.

    This is an easy reform that 99.9% of us would support, yet Congress does nothing.

    • David W

      They’re not avoiding being taxed on the income, just delaying it.

      • MarkShearer

        That’s why I said “defer”.

        • David W

          I guess I don’t understand why deferring income is a problem. With the obvious exception of the scale, it’s no different than a 401k, pension, etc.

          • MarkShearer

            If deferral is not a problem, why is it strictly limited to $18K or $24K in an employer-sponsored plan, or just $5,500 in an IRA for 150MM workers? Why not let us defer more if we are responsible and can afford it? Can’t take the revenue hit? OK fine.

            But for a few thousand fat cat executives? Have at it, boys and girls. Defer as much as you want, hand off to the kids who can step up the cost basis, etc., etc. Revenue hit? What revenue hit? Effective tax rate on $100MM income with $90MM deferred is 4%? No problem.

            Same limits for everyone or no limit for everyone. Take your pick. No special treatment. Equal protection of the law. Simple fairness.

        • David W

          I’d have to agree with you then, I’ve never understood why you can’t defer more than 18k in a 401k, other than the govt doesn’t want to lose their income from taxing you. The number of people who would actually do it would be few, but at least they’d have the option.

          Legally I doubt there’s anything preventing the rest of us from doing the same thing, except the majority of companies out there don’t offer it unless you have the leverage to negotiate it into your contract.

  • Chris S

    Good. Let the wealthy be wealthy. I want to be wealthy. It’s not bad to be wealthy. And it’s not evil if those who work the hardest and are the most valuable to the business are paid the highest salaries. The law of supply and demand works for both production AND the labor force. There are millions of mechanics. There are a handful of leaders. I just wish nobody had a damned income tax.