The massive retirement gap for CEOs versus workers

When it comes to how income inequality can impact retirement, one has to look no further than the CEO suite.

While top executives earn higher salaries and bonuses than the rank-and-file during their careers, they are also subject to huge retirement windfalls which can make the income imbalance seem almost trivial. Take Target (TGT) and its former chief executive Gregg Steinhafel, who left the company after its massive credit-card breach and was given retirement plans worth more than $47 million, according to Bloomberg News.

That makes his retirement package worth more than 1,000 times the value of the average $45,000 balance of Target workers in their 401(k) plans. At the same time, Target workers can't even contribute to the company's retirement plan if they've worked fewer than 1,000 hours at the retailer. The report comes at a time when income inequality is increasingly concerning to Americans, and as many workers are also facing a retirement crisis, given that four out of 10 Americans haven't even started saving for retirement.

Steinhafel's retirement package "is kind of shocking," said Robert Hiltonsmith, a senior policy analyst at the liberal-leaning think tank Demos. "We've seen that wages have been stagnant and even falling over the past 10 to 20 years, but that undercounts a kind of stealth cut in total compensation, because workers 20 or 30 years ago had a pension. Now, either they are not getting anything or only getting some contribution from an employer through a 401(k) match."

The number of pension plans have dropped by more than 70 percent from 1984 to 2012, while 401(k) plans have boomed to more than 500,000 from 17,000 in the same time period, Bloomberg notes. In an email, Target noted that what Bloomberg calls retirement package includes "a number of items, including deferred compensation, which is earned during the course of working, as part of an annual salary."

The country's shift to 401(k)s puts the onus on workers themselves to contribute money to their retirements. In an October survey from investment firm BlackRock, many respondents said they were unable to set aside retirement savings because of low earnings, high living costs and unplanned expenses. On average, Americans have saved only about $58,000 for their retirements, BlackRock found.

Yet at the same time, chief executives at the country's biggest companies continue to see massive bumps in their retirement plans, thanks to carefully crafted plans designed for top executives. Called supplemental executive retirement plans, or SERPs, these plans often calculate how much to set aside by multiplying years of service and average pay for an executive over several recent years of work, when their pay is highest. SERPs are usually paid in cash when executives leave or retire, and are often unfunded liabilities on companies' balance sheets.

"It's a basically a giant slush fund for executives," Demos' Hiltonsmith noted.

The bottom line: Companies are looking out for their top executives' golden years, which means huge rewards when they retire. CEO pensions at the 10 biggest U.S. companies are on average 239 times larger than the average employee's 401(k) balances for those same businesses, NerdWallet found in a 2013 study.

So how did Steinhafel's $47 million add up? He received $27.7 million from a deferred compensation plan and the pension plan for top executives; $9.8 million from an earlier deferred compensation plan; and $9.9 million in interest payments on that amount.