MERRILL LYNCH & Co.
JUNE 1, 1998
THE WEALTH OF U.S. FAMILIES IN 1995
Report to Merrill Lynch
By: Joseph M. Anderson
CAPITAL RESEARCH ASSOCIATES
127 HESKETH STREET
CHEVY CHASE, MARYLAND
THE WEALTH 0F U.S. FAMILIES IN 1995
EXECUTIVE SUMMARY
The average(median)U.S. family in 1995 had net financial assets of only about
$1,000. This is the value of money in the bank, stocks, bonds, and other securities,
after subtracting loans, credit card debt and other unsecured debt. Average gross
financial assets were about $2,700, before subtracting unsecured debt.
Family financial assets vary by age of the head of family and by family income.
Families with heads age 45–54 have median net financial assets of $l,700. Those with
heads age 55–64 have median financial assets of $4,800. Families with heads age 65–
74 have the highest median net financial assets among age groups, $12,500.
Most families with income below $25,000 have negligible financial assets. Median
net financial assets for families with income below $10,000 is zero, and median net
financial assets for families with income of $10,000–$25,000 is $200. Families with
income of $25,000–$50,000 have median net financial assets of $1,600, and those
with income of $50,000–$75,000 have median net financial assets of $8,000. Families
with income greater than $100,000 have median net financial assets of $51,000.
Median net worth of all families – the value of all real and financial assets, including
equity in the home, other real estate, vehicles, own businesses, as well as financial
assets – was about $35,500. For the average family, the majority of net worth is equity
in their home. After subtracting home equity, the remaining net worth of the median
family was $10,000.
Wealth is very unevenly distributed. The lowest 30 percent of families, ranked by the
size of their net financial assets, have zero or negative net financial assets, that is, their
unsecured debts equal or exceed their gross financial assets. The lowest 20 percent
have negative net financial assets (net debts) of $800 or greater. The median net
financial assets of the bottom fifth is $-4,700. Families in the top fifth have median
net financial assets of about $85,000. The bottom fifth of families have median net
worth of $7,600, while the top fifth have median net worth of $202,000.
THE WEALTH OF U.S. FAMILIES IN 1995
Introduction - Data Sources
This report presents the results of analysis of data on the real and financial wealth of
U.S. persons and families in 1995. These data were collected by the U.S. Bureau of
the Census in the Survey of Income and Program Participation (SIPP) for January
through April of 1995. The SIPP provides data on the income, assets, and
demographic characteristics of large representative samples of the noninstitutionalized population of the United States. These are the most recent data on
household and personal wealth released by the Census Bureau*.
*The 1995 family wealth and income data are from the Survey of Income and Program Participation (SIPP) 1993
Panel Wave 7 Topical Module and from the core interviews for the twelve month period ending in the month of the
topical module, contained in the 1993 SIPP Longitudinal Microdata File. The 1993 Wave 7 Topical Module sample
included 17,138 households headed by persons age 25 or older, and 18,470 families headed by persons age 25 or
older randomly selected to be representative of the entire U.S non-institutional population.
The l993 Panel Wave 7 data on assets and liabilities were collected in detailed interviews conducted in February,
March, April, and May 1995, and refer to asset and liability balances on the last day of the month that preceded the
interview. Thus, the data in this report are averages of balances held and owed at thc end of January, February,
March, and April 1995. Each person's income was calculated by summing the income from all sources over each of
the 12 months ending with the reference month for the assets data. Family income was calculated as the sum of the
income of all of the persons in the family.
The unit of analysis of this study is the family. The definition of family used in this study corresponds to the notion
of the nuclear family – a married couple and their natural and adoptive children, if any. A single person living alone
or unrelated to other persons in the household is considered to be a one-person family. Related persons living in the
same household but not part of the same nuclear family are in separate families. Thus, in a household containing a
married couple and their minor children, and one spouse's parent(s), the couple and children would be one family,
and the parent(s) would be a separate family. An adult child age 25 or older and spouse, if any, living with his/her
parents are a separate family. The concept of family used in this study is the unit which singly or jointly owns assets,
makes decisions concerning their accumulation and disposition, and shares in their long-term (life cycle) value, e.g.
for retirement income.
This definition of family differs from the definition usually used by the U.S. Census Bureau. The family is defined
by the Census Bureau as two or more persons who are living together and related by blood, marriage, or adoption.
Wealth and other economic variables are sometimes studied using the household as the unit of analysis. A household
is a person or group of persons living at the same address. A household may consist of one person living by himself
or herself, a group of unrelated individuals, or one or more families. A study of wealth, similar to the one in this
report, but using the household as the unit of analysis, is available from the author.
Financial Assets by Age Group
Table 1 shows mean and median** family financial assets*** in 1995, classifying
families by the age of the family head
The median level of gross financial assets over all U.S. families in 1995 was about
$2,700.**** After subtracting unsecured debt, the median level of net financial assets
for all families was $1,000. For U.S families with head age 45–54, median gross
financial assets were about $4,200, and median net financial assets were about $l,700
in 1995. Families with head age 55–64 had median gross financial assets of about
$6,900 and median net financial assets of about $4,800. Median financial assets are
greater for older age groups, peaking in the age group 65–74 at about $12,500 of net
financial assets, then declining to about $10,300 for families with heads age 75 and
older.
** The median is the level of assets held by the family at the mid-point of the distribution – i.e., half of the families
have more and half have less. The mean equals the total level of assets held by all families divided by the number of
families.
*** Family gross financial assets include checking accounts, savings accounts, money market deposit accounts,
certificates of deposit, money market funds, government securities, corporate and municipal bonds, stocks and
mutual fund shares, IRA and Keogh accounts, mortgages held from sale of real estate, money owed to members of
the family by others, unit trusts, and other financial investments, less debt secured by financial assets (such as stock
margin debt). Net financial assets equal gross financial assets less unsecured debt (such as unpaid bills, bank debt,
credit card balances). Employer pension fund and other benefit accruals, including defined contribution pension
balances and 401(k) account balances, defined benefit pension accruals, and ESOPs, are not included in family net
financial assets data collected by the Census Bureau.
****Only families headed by persons age 25 or older are included in this study. Individuals and families headed by
persons younger than 25 are often students or persons in transition between education and work and may not be
representative of the wealth holdings of the general population
TABLE I
MEAN AND MEDIAN FAMILY FINANCIAL ASSETS
BY AGE 0F FAMILY HEAD: 1995
Age of
Head
25–34
35–44
45–54
55–64
65–74
75 and
older
All(b)
Gross Financial Assets Net Financial Assets(a)
Mean
Median
Mean
Median
$6,852
$700
$3,041
$0
$18,047
$2,000
$13,625
$249
$35,253
$4,249
$30,011
$1,700
$50,675
$6,913
$47,669
$4,800
$60,576
$13,385
$59,284
$12,500
$51,509
$11,225
$51,069
$30,957
$2,660
$27,453
$10,325
Number of
Families
23,665,888
25,336,418
18,861,258
12,899,682
12,181,958
9,796,196
$1,000 102,741,400
(a)Net financial assets equal gross financial assets less unsecured debt
(b)Families with head age 25 or older
Source: Capital Research Associates analysis of Survey of Income and Program
Participation data
Table I also shows the mean level of financial assets by age of family head in 1995.
Because of the highly skewed distribution of financial assets {a relatively small
proportion of families hold a large proportion of all financial assets, with the assets of
families with the largest holdings being many times greater than the median), the
mean is significantly greater than the median, and may not reflect the asset holdings
of typical families.*****
The mean net financial assets of all families was about $27,500, and the mean gross
financial assets was about $31,000. The mean level of net financial assets of families
with head age 45–54 was about $30,000, and the mean level for families with head
age 55–64 about $47,700.
***** Since financial asset holdings are highly skewed, the means may be sensitive to "outliers," or extreme values.
That is, the existence of one or a small number of families with very high wealth in the sample may influence the
value of the mean. The median is not sensitive to extreme values.
Net Worth and Home Equity by Age Group
Table 2 shows mean and median levels of total family wealth (net worth), the amount
of family wealth in the form of housing equity and family wealth excluding housing
equity.
TABLE 2
FAMILY NET WORTH, HOME EQUITY,
AND NET WORTH LESS HOME EQUITY
BY AGE OF FAMILY HEAD: l995
Age of
Head
25–34
35–44
45–54
55–64
65–74
75 +
Net Worth
Mean
$23,505
$62,167
$108,343
$146,604
$155,586
$127,379
Median
$5,579
$25,688
$53,975
$86,478
$97,474
$80,000
Home Equity
Mean
$11,052
$32,381
$50,595
$65,440
$71,486
$61,141
Median
$0
$9,070
$28,449
$49,927
$55,000
$40,000
Net Worth Less Home
Equity
Mean
Median
$12,454
$3,375
$29,787
$8,000
$57,747
$14,675
$81,165
$19,873
$84,100
$26,004
$66,238
$18,104
All(a)
$89,634 $35,459 $42,341 $14,641
$47,293
$10,005
(a) Families with head age 25 or older
Source: Capital Research Associates analysis of Survey of Income and Program
Participation data
Table 2 shows that a large proportion of the total wealth of most U.S. families is in the
form of equity in their home. Median net worth for all families is about $35,500.
Excluding home equity, median total net wealth for all families is about $10,000. This
includes all other assets, including vehicles, other real estate, businesses owned, and
financial assets. For families with heads age 45–54, median total net worth is about
$54,000. Excluding home equity, median wealth is about $14,700 for that age group.
For families with heads age 55–64, median total net worth is about $86,500, but
excluding housing it is about $19,900. According to these estimates, both housing and
non-housing wealth increase with age to the age group 65–74, then decline.
Table 2 also shows the mean levels of total family wealth, family wealth in the form
of home equity, and family wealth excluding home equity. Mean net worth of all
families is about $89,600 of which housing equity accounts for about 47 percent.
Excluding home equity, mean wealth is about $47,300. As is the case with financial
wealth, the distributions of housing wealth and non-housing wealth are skewed, so the
mean wealth exceeds the median. For housing equity the mean is closer to the median
than for other forms of wealth suggesting that it is more evenly distributed than other
forms of wealth.
Size Distribution of Financial Assets
Table 3 shows the size distribution of net financial assets over all families by quintile
and the median and mean levels of family net financial assets and net worth for each
quintile of families classified by level of net financial assets.
TABLE 3
FAMILY NET WORTH AND NET FINANCIAL ASSETS
BY QUINTILE OF NET FINANCIAL ASSETS: 1995
Quintile of
Net
Financial
Assets
1st Quintile
2nd
Net Worth
Quintile
Range
Less than
$-820
$-820 –
Mean
Median
Net Financial Assets
Mean
Median
$27,036
$7,625 ($10,117)*** ($4700)***
$19,136
$2,670
($102)***
$0
Quintile
3rd
Quintile
$50
$51 –
$42,579 $17,250
$4,055
$4,056 –
4th Quintile
$88,472 $66,676
$31,000
5th Quintile > $31,000 $271,579** $202,348
All*
$89,634 $35,459
$1,365
$1,000
$13,927
$12,000
$132,382**
$27,453
$84,901
$1,000
* Families with head age 25 or older
** Mean values for the top quintile may be distorted by "top-coding", a limit on the value of
each asset class reported in the public use data base imposed to protect confidentiality
*** ( ) indicates negative net financial assets
Source: Capital Research Associates analysis of Survey of Income and Program
Participation data
Table 3 shows that only the top 20 percent of U.S. families had net financial assets of
$31,000 or greater in 1995. The top ten percent had net financial assets of $85,000 or
more, compared to median financial assets of $1,000 for the total population. Table 3
shows that, when families are ranked by level of financial assets, the lowest 30
percent of families had zero or negative net financial assets. That means that, for the
average family in the bottom 30 percent, unsecured debt equaled or exceeded gross
financial assets. The bottom 20 percent had net debts of $820 or greater, and the
bottom 10 percent had net debts of S4,700 or greater.
Financial Assets by Income Class
Wealth is unevenly distributed over income classes. Families with low incomes
typically have very low levels of assets. Table 4 shows mean and median total net
assets and net financial assets of families in 1995 classified by family income class.
Median net financial assets of families with income less than $10,000 are negligible,
and median total net worth of families in this income class is $2,200. Median financial
assets of families with income of $25,000–$50,000 (33 percent of total families) is
$1,600, and median net worth of families in this income class is $40,000. For families
with income of $50,000–$75,000 (15 percent of families), median financial assets is
$8,000, and median net worth is $82,000. For families with income greater than
$l00,000 (3.3 percent) median financial assets is $51,000 and median net worth is
$235,000.
TABLE 4
FAMILY NET WORTH AND NET FINANCIAL ASSETS
BY TOTAL FAMILY INCOME CLASS: l995
Family
Total
Income
< $10,000
$10,000 –
24,999
$25,000 –
49,999
$50,000 –
74,999
$75,000 –
99,999
$100,000+
All*
Net Worth
Mean Median
$26,673 $2,200
Net Financial
Percent
Assets Number of
of
Families
Families
Mean Median
$4,086
$0 14,360,642
14.0%
$51,857 $13,700
$13,239
$200 30,161,093
29.4%
$84,388 $39,951
$23,144
$1,600 33,591,272
32.7%
$136,193 $81,758
$43,990
$8,000 15,107,304
14.7%
$197,650 $128,958
$70,204 $24,500
6,119,969
6.0%
$341,141 $235,000 $144,360 $50,900 3,401,121
$89,634 $35,459 $27,453 $1,000 102,741,401
3.3%
100.0%
* Families with head age 25 or older
Source: Capital Research Associates analysis of Survey of Income and Program
Participation data
Net Worth and Home Equity by Income Class
Table 5 shows mean and median family net worth, home equity, and net worth less
home equity by family income class. Median home equity for families with income of
$25,000–$50,000 was $18,600, and median net worth less home equity was $12,700.
For families with income $50,000–$75,000, median home equity was $41,000, and
net worth less home equity, was $26,700.
TABLE 5
FAMILY NET WORTH, HOME EQUITY,
AND NET WORTH LESS HOME EQUITY
BY TOTAL FAMILY INCOME CLASS: 1995
Family
Total
Income
< $10,000
$10,000 –
24,999
$25,000 –
49,999
$50,000 –
Net Worth
Home Equity
Mean Median
Mean Median
$26,673 $2,200 $17,526
$0
$51,857 $13,700 $29,316
Net Worth Less
Home
Mean Median
$9,147
$500
$0
$22,541
$4,675
$84,388 $39,951 $42,081 $18,641
$42,308
$12,700
$136,193 $81,758 $61,488 $40,936
$74,705
$26,703
74,999
$75,000 –
99,999
$100,000+
All(a)
$197,650 $128,958 $79,026 $60,000 $118,624
$49,050
$341,141 $234,999 $114,143 $106,000 $226,998 $118,549
$89,634 $35,459 $42,341 $14,641 $47,293 $10,005
(a) Families with head age 25 or older
Source: Capital Research Associates analysis of Survey of Income and Program
Participation data
Financial Assets of Families with Income of $30,000 or More, by Age Group
According to the SIPP data, in 1995 about 52 percent of families had income of less
than $30,000. As Table 4 shows, the median financial assets of families with income
less than $30,000 are small. Excluding families with income less than $30,000, the
median net worth of the 48 percent of families with income of $30,000 or more was
about $73,400, and the median net financial assets were about $6,000.
Table 6 reports the average wealth of only those families with income of $30,000 or
greater, classified by age of head. Even among the 48 percent of families with income
of $30,000 or more, median financial assets are relatively modest. Families with head
age 45–54 had median net financial assets of $7,500 (compared to $l,700 for all
families of this age group – see Table 1). Families with head age 55–64 had median
net financial assets of about $23,700 (compared to $4,800 for all families in this age
group).****** These data indicate that, even among families with relatively higher
incomes, in the age groups where workers are near the peaks of their earning careers
and may be saving for retirement, the financial wealth of the median family would
provide by itself only a modest supplement to other sources of retirement income.
****** Table 6 shows that among families with heads age 65 or older, those with incomes of $30,000 or more have
net financial assets of considerably greater than all families of the same age groups (shown in Table 1). For ages 65–
74, families with income of $30,000 or more (34 percent of the families in this age group)have median net financial
assets of $62,100, vs. $12,500 for all families of this age group (Table 1). For families with head age 75 or older,
those with income of $30,000 or more (17 percent of the families of this age group) had median net financial assets
of $100,000, vs. $10,300 for all families with head age 75 or older. Most persons in these age groups are retired,
with zero or negligible earned income, so families with income greater than $30,000 are considerably above the
average in income and wealth.
TABLE 6
FAMILY NET WORTH AND NET FINANCIAL ASSETS OF
FAMILIES WITH TOTAL INCOME OF $30,000 OR GREATER
BY AGE OF HEAD OF FAMILY: 1995
Age of
Head
25–34
35–44
45–54
55–64
65–74
75 or older
All(a)
Mean
$42,102
$89,032
$146,386
$215,894
$270,623
$299,947
$133,607
Net Worth
Median
$20,949
$53,482
$90,815
$145,350
$202,647
$225,800
$73,392
Net Financial Assets
Mean
Median
$7,283
$800
$20,996
$3,200
$43,189
$7,500
$78,291
$23,700
$118,783
$62,100
$146,748 $100,000
$44,055
$6,049
Number of
Families
9,872,828
14,954,317
12,274,800
6,821,179
4,152,084
1,701,111
49,776,319
(a) Families with head age 25 or older
Source: Capital Research Associates analysis of Survey of Income and Program
Participation data