Would Baby Bonds Reduce Racial Retirement Wealth Inequality?
17 Pages Posted: 31 Oct 2023
Date Written: September 2023
Baby bonds, publicly-funded trust funds, are designed, and projected, to reduce racial wealth inequality among young adults. While existing local iterations seed less, a federal proposal would seed up to $50,000, varying inversely with household wealth and invested on infants’ behalf until young adulthood. Effects on retirement wealth are uncertain and would be subject to two opposing forces. First, inequality could grow if less-wealthy recipients must consume the funds for immediate needs. Yet, secondly, its progressivity may ameliorate life-course processes that exaggerate inequalities. Complementary policies could magnify baby bonds’ late-life impact by improving households’ financial capacity across the life course.
Keywords: Baby bonds, wealth inequality, racial differences, retirement
JEL Classification: J15, J26, J32, D31
Suggested Citation: Suggested Citation