Tags: Polls | bankrate | income | inequality | prime

Bankrate: Income Gap Grows for Those in Prime Earning Years

By Sandy Fitzgerald   |   Monday, 09 Dec 2013 11:45 AM

The income gap between the nation's "haves" and "have-nots" has been increasing since the recession, and it's growing fastest among those between the ages of 35 and 44, the best earning years for many workers, a new survey reveals.

The effect is that many people's financial future is in jeopardy.

"We're seeing a tale of two retirements," said Chris Kahn, research and statistics analyst for Bankrate.com, which on Monday released its income analysis survey. "These are key transition years."

Kahn said high unemployment and stagnant wages for those in their 30s and 40s are to blame, and they hit just as people are trying to solidify their wealth.

The 35-44 age group's income gap grew 21 percent between 1992 and 2012, reports Bankrate, and is higher than in any other group and more than double the combined average income gap of all groups.

The widest income gap remains between people in the 65-plus age group, but it rose by only 3 percent during that time.

The income gap is also rising among people aged 45-54, rising 18 percent during the past 20 years.

According to the Bankrate survey, the bottom one-fifth of U.S. households earn $11,490 annually. The next one-fifth earn $29,696; the middle tier, $51,179; the next tier, $82,098; and the top tier, $181,905.

While those in the 35-44 age group still have time to save for their retirement, they also face serious financial issues, such as home ownership, the costs of raising children, and spending money caring for aging parents.

People in that age bracket are showing a marked divide between becoming wealthier and falling behind, depending on their wages and investments.

"This age group is in a kind of transition period, going from establishing themselves in their careers to that next level," says Jason Flurry, president of Legacy Partners Financial Group. "They've lived a little, but they're not really mature at this point, and if they have kids, a lot of their money gets eaten up in just maintaining their lifestyle."

Further, people who don't have a handle on their finances for those years often have difficulty recovering and setting the "course for the next decade; if you don't, in many cases, you can't recover," Flurry said.

Lauren Prince, a certified financial planner for Prince Financial Advisory in New York City, said people in the 35-44 age bracket were also slammed when the recession hit middle-management jobs.

People in that age bracket have often reached the middle-management level, "but technology is replacing them to the point where companies are making do with fewer people," said Prince.

Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida., told Bankrate that people in the 35-44 age group were also hit hard because of the housing crash during the recession, and they probably lost more home equity than older homeowners who bought 30 or 40 years ago.

"They're more likely to be recent homeowners and more likely to be underwater on their mortgage," said Snaith.

Further, he said, people in that age bracket may have been forced into jobs they wouldn't otherwise take.

"Many of the new job opportunities are focused on the service industries and are typically not high-paying," he adds. "The labor market improves each month, but the pace is still underperforming, and for those in the phase of life where expenses are high, it could be tough to climb back up the ladder."

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