Widespread Interactions With Criminal Justice System Cast Long Shadow On Retirement Savings
A recent Federal Reserve survey on people's economic situation includes a series of questions on whether people have been taken into police custody, convicted and served time. The same survey, the Fed's Survey of Household Economics and Decisionmaking (SHED) also asks questions about retirement savings.
Interactions with the criminal justice system are fairly widespread. It is necessary to combine data years to make sure that sample sizes are large enough. In 2023 and 2024, 13.7% of adults said that they had been taken into custody in the past, 6.0% said that they had been convicted and 1.8% of people indicated that they served time.
The respective shares of people are higher for Black and Latino people than for White people, with 17.3% of African-Americans and 17.9% of Latinos in 2023 and 2024 saying that they had been taken into custody, but only 12.5% of White adults said that this was the case. A lot of these racial differences are not explained by differences in criminal behavior, but rather, are the result of structural biases against Black and Latino adults.
These interactions with the criminal justice system make it more difficult for people to save for retirement. For one, those who have a criminal record will face more labor market obstacles than those without a criminal record. They will work in less stable jobs and receive lower wages. This means that they will have a harder time qualifying for retirement benefits and have less money to put away towards retirement. In addition, people who have been arrested and convicted will have legal fees, but also face other economic challenges, for instance, in renting a house or apartment. They face higher costs, impeding their retirement savings and necessitating more liquidity in their retirement savings, for example, by withdrawing money pre-retirement or taking out loans on their retirement accounts. All of these factors could make it less likely that people have retirement accounts to begin with and more likely that the savings in those accounts grow more slowly.
Earlier data already showed differences in retirement savings by interactions with the criminal justice system. Specifically, 48.4% of people that did not have a family member in prison or jail had any retirement savings in 2019, while this was the case for only 37.7% of people with an incarcerated family member.
Recent Federal Reserve data for 2023 and 2024 provide additional details on the link between interactions with the criminal justice system and retirement savings. The data allow for a separation of respondents into three distinct groups: Those who were taken into police custody and were convicted, those who were taken into police custody, but were not convicted, and those who were not taken into police custody. The SHED also includes a number of key measures for retirement savings. It is, for example, possible to create one indicator whether people have any retirement benefit – a 401(k) type account, an IRA or a DB pension. It is also possible to create another indicator whether people increased the liquidity in their retirement savings by borrowing from their retirement accounts, withdrawing money from a retirement account or reducing their retirement account contributions. These actions all slow the growth of retirement savings as people need more liquidity.
People who had any interactions with the retirement system fare worse in terms of retirement savings (see Figure below). The share of people who worked for somebody else and who were at least 25 years old with a retirement benefit is lower among those who were convicted (65.6%) than was the case for people who were taken into custody, but who were not convicted (76.5%), which was in turn much lower than the share of working people who were never taken into custody (84.5%). Having been convicted, regardless of whether the person served time or not, reduces the chance of having a retirement benefit by almost 19 percentage points, compared to somebody, who had never been taken into custody.
And, those who were convicted also need more liquidity in their retirement accounts (see Figure above). In particular, 25.6% of those working for somebody else who were at least 25 years old and who had a retirement account also took out a pension loan, withdrew money before retirement or lowered their retirement plan contributions in 2023 and 2024. The respective shares for the other two groups were 16.2% and 16.0%. Having been convicted thus also goes along with a greater need for liquidity in retirement accounts, which could slow the growth of retirement savings.
A substantial share of Americans are arrested and convicted. Convictions can cast a long financial shadow over people's lives. This includes negative correlations between arrests and convictions, on the one hand, and retirement savings, on the other hand. Those who have been arrested and convicted are much less likely to have any retirement plan, for instance. Financial insecurity follows criminal convictions for some time.
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Gold futures (GC=F) declined 2.5% early on Monday as investors awaited clarity from the White House over its trade position on the precious metal amid reports that imports of Swiss gold bars would not be exempt from tariffs. Small US firms paying Trump tariffs face $202B annual hit Small US businesses are struggling to comply with President Trump's new tariffs. These companies, which are the source of more than half of the country's job creation are also finding it hard to cope with the growing financial strain from higher import costs. Bloomberg News: Read more here. Small US businesses are struggling to comply with President Trump's new tariffs. These companies, which are the source of more than half of the country's job creation are also finding it hard to cope with the growing financial strain from higher import costs. Bloomberg News: Read more here. 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"We'll see what happens," he said during a White House press conference, adding, "They've been dealing quite nicely." The countries have held multiple rounds of trade talks during the 90-day suspension of sky-high tariffs on each other. Both sides have hailed progress in those talks. An extension into the fall could potentially set up a Trump meeting with Chinese leader Xi Jinping, which Trump has suggested could happen before the end of the year. Swiss government to meet pharma firms to discuss US tariffs The Swiss government is due to meet this week with leaders from Swiss pharmaceutical companies Roche and Novartis, which have faced pressure from President Trump to lower their drug prices in the US. The meeting comes as Switzerland aims to negotiate for a lower tariff rate than the 39% rate the Trump administration imposed last week. And should Trump follow through on pharmaceutical tariffs as well, Roche and Novartis are considered to be more exposed, as they have comparatively fewer US manufacturing sites. From Reuters: Read more here. The Swiss government is due to meet this week with leaders from Swiss pharmaceutical companies Roche and Novartis, which have faced pressure from President Trump to lower their drug prices in the US. The meeting comes as Switzerland aims to negotiate for a lower tariff rate than the 39% rate the Trump administration imposed last week. And should Trump follow through on pharmaceutical tariffs as well, Roche and Novartis are considered to be more exposed, as they have comparatively fewer US manufacturing sites. From Reuters: Read more here. New gold tariffs are in effect. Will Costco gold bars be affected? Gold (GC=F) has been surging all year, and buying gold bars from Costco is just about the easiest way to get your hands on the precious metal — if you're lucky enough to find them in stock. However, the surprising announcement of additional tariffs on gold bars by US Customs and Border Protection (CBP) left many wondering if the duties applied to Costco's gold bars as well. Yahoo Finance's Hal Bundrick reports: Read more here. Gold (GC=F) has been surging all year, and buying gold bars from Costco is just about the easiest way to get your hands on the precious metal — if you're lucky enough to find them in stock. However, the surprising announcement of additional tariffs on gold bars by US Customs and Border Protection (CBP) left many wondering if the duties applied to Costco's gold bars as well. Yahoo Finance's Hal Bundrick reports: Read more here. US consumers to bear brunt of tariff hit: Goldman Goldman Sachs GS) says that President Trump's tariffs are only beginning to raise prices for shoppers, adding more uncertainty to the Treasury market where investors are unsure about how quickly interest rates will be cut. Bloomberg News reports: Read more here. Goldman Sachs GS) says that President Trump's tariffs are only beginning to raise prices for shoppers, adding more uncertainty to the Treasury market where investors are unsure about how quickly interest rates will be cut. Bloomberg News reports: Read more here. Nvidia, AMD to pay 15% on China AI chip sales in US deal Nvidia (NVDA) and AMD (AMD) have agreed to give 15% of their revenue from AI chip sales in China to the US government. This deal helps them get export licenses but is an unusual step that might worry both companies and Beijing. Nvidia will share 15% of earnings from its H20 AI accelerator in China, while AMD will do the same for its MI308 chip. Bloomberg News reports: Read more here. Nvidia (NVDA) and AMD (AMD) have agreed to give 15% of their revenue from AI chip sales in China to the US government. This deal helps them get export licenses but is an unusual step that might worry both companies and Beijing. Nvidia will share 15% of earnings from its H20 AI accelerator in China, while AMD will do the same for its MI308 chip. Bloomberg News reports: Read more here. Why Trump's soybean ask of China is 'highly unlikely' China is the world's largest soybean buyer, with nearly a quarter of those purchases coming from the US (and most of the rest coming from Brazil). President Trump's statement that he hopes "China will quickly quadruple its soybean orders" would require China to import the vast majority of its soybeans from the U.S. "It's highly unlikely that China would ever buy four times its usual volume of soybeans from the US," Johnny Xiang, founder of Beijing-based AgRadar Consulting, told Reuters. Read more here. China is the world's largest soybean buyer, with nearly a quarter of those purchases coming from the US (and most of the rest coming from Brazil). President Trump's statement that he hopes "China will quickly quadruple its soybean orders" would require China to import the vast majority of its soybeans from the U.S. "It's highly unlikely that China would ever buy four times its usual volume of soybeans from the US," Johnny Xiang, founder of Beijing-based AgRadar Consulting, told Reuters. Read more here. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
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Morning Bid: Stocks soar, volatility evaporates
By Mike Dolan LONDON (Reuters) - What matters in U.S. and global markets today By Mike Dolan, Editor-At-Large, Finance and Markets U.S. July inflation data didn't sound the all clear on tariffs but also didn't send an unequivocal signal about the longer-term impacts either – and that seemed to be enough to goose Fed easing expectations, spur Wall St stocks to new records and sink volatility gauges. Futures markets are now fully convinced another quarter point rate cut is coming next month and they're almost halfway priced to three cuts by the end of the year. The S&P 500 and Nasdaq raced more than 1% higher on Tuesday, the VIX "fear index" sank to the lowest of the year and futures are up again ahead of today's bell. * Bond market volatility cratered to its lowest in more than 3-1/2 years, even as "core" inflation rose back above 3% for the first time in five months, as Treasury yields fell across the curve and the dollar index ebbed to its weakest in more than a fortnight. President Trump again lambasted Fed chair Jerome Powell for not cutting rates more quickly and threatened a "major lawsuit" against him, while also hitting out at Goldman Sachs boss David Solomon and its chief U.S. economist Jan Hatzius for the bank's research on tariffs and forecasts. * Treasury Secretary Scott Bessent talked about the Fed possibly cutting rates 50 basis points next month "to make up for the delay" and was hopeful the latest Trump appointee to the Fed board, White House advisor Stephen Miran, could be confirmed by the Fed's September meeting. Meantime, the White House said the plan was to continue publishing monthly employment statistics even though Trump's pick to head the embattled Bureau of Labor Statistics, E.J. Antoni, said this month that the BLS should suspend monthly payrolls releases until data problems were fixed - and rely instead on quarterly reports. * Once again, tech stocks led the charge higher on Wall Street on Tuesday. Alphabet shares rose 1.2% as Perplexity made a $34.5 billion cash offer to buy the company's Chrome browser and Intel climbed 5% after Trump met CEO Lip-Bu Tan and praised him, after claiming only last week that Tan was compromised due to Chinese links. European and Asia shares were higher, with Japan's Nikkei hitting a record high, and eyes are now shifting to the U.S.-Russia summit in Alaska on Friday for clues about a possible Ukraine ceasefire. Make sure to check out today's column, where I consider whether the now government-blessed "stablecoin" explosion will juice or destabilise the economy. Today's Market Minute * U.S. authorities have secretly placed location tracking devices in targeted shipments of advanced chips they see as being at high risk of illegal diversion to China, according to two people with direct knowledge. * Perplexity AI made a $34.5 billion unsolicited all-cash offer for Alphabet's Chrome browser on Tuesday, a bid far above its own valuation as the startup reaches for the browser's billions of users pivotal to the AI search race. * Investors have faced several counterintuitive swings this year, including the dollar's plunge and record highs in bitcoin and U.S. stocks. Now, writes ROI columnist Jamie McGeever, we can add another to that list: the stellar outperformance of Latin American currencies against the dollar. * Overcapacity has made its way into China's domestic market, with price wars leading to collapsing profitability and accelerating deflation. The government has responded by launching a so-called 'anti-involution' program. It's had some early wins, but this could be a lengthy battle, claims Emmer Capital Partners Ltd founder Manishi Raychaudhuri. * The pace of new capacity of U.S. solar, wind and battery systems has slowed nationally and in key states this year, weighing on sentiment surrounding clean energy. But, writes ROI columnist Gavin Maguire, climate trackers can take heart from the continued growth outside Texas and California. Chart of the day Wall Street "fear gauges" are plunging, with the VIX index measuring one-month implied volatility in the S&P500 plumbing its lowest levels of the year and the equivalent Treasury market MOVE index at its lowest since January 2022. Today's events to watch * Richmond Federal Reserve President Thomas Barkin and Atlanta Fed President Raphael Bostic and Chicago Fed President Austan Goolsbee both speak * U.S. corporate earnings: Cisco Systems Want to receive the Morning Bid in your inbox every weekday morning? Sign up for the newsletter here. You can find ROI on the Reuters website, and you can follow us on LinkedIn and X. Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. (By Mike Dolan; Editing by Frances Kerry) Sign in to access your portfolio
