NEW YORK (Reuters) – The deep declines in the U.S. stock market over coronavirus fears the last three weeks have left a dent in retirement portfolios and brokerage accounts, costing on average each person in the United States around $16,000 as of Monday’s close before a rebound Tuesday erased some of those losses.
Americans are mostly exposed to stocks via their 401(k) retirement plans.
That does not account for wealth disparity and spread of ownership of stock. According to an analysis of 2016 Federal Reserve data by Edward Wolff, an economics professor at New York University, 84% of stocks owned by U.S. households are owned by the wealthiest 10% of Americans.
Here is a breakdown of stock ownership and how much risk ordinary investors face:
WHY ARE AMERICANS SO EXPOSED TO THE STOCK MARKET?
The U.S. retirement system no longer relies on defined benefit pension plans – which pay out a guaranteed amount until death. That means that people are mostly in charge of their own retirement, investing via 401(k) plans.
It also means financial pain is personal. When the market fell 7.6% on Monday, the average person became poorer by $5,682, according to calculations by S&P Dow Jones Indices senior index analyst Howard Silverblatt.
Around 42% of the working-age population with a full-time job has a 401(k) or similar plan, and those funds are overwhelmingly invested in stocks, according to U.S. Census data.
According to the Investment Company Institute there are $5.9 trillion in assets in 401(k) plans overall, with $3.8 trillion in mutual funds. According to Morningstar, $1.7 trillion is invested in target-date funds which have a target on when a person retires and are typically heavily weighted to stocks.