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Typical Household Has
Few Financial Assets and Modest Wealth
In research commissioned by CFA and Primerica, economist Joseph M.
Anderson of Capital Research Associates found that the typical American household
has few net financial assets ($1,000) and modest net wealth ($35,500). Anderson used
1995 data collected by the U.S. Bureau of the Census in the Survey of Income and
Program Participation (SIPP), the most recent available government data on household
assets and wealth. (Assets in IRA and Keogh accounts, but not those in defined
benefit or defined contribution pension plans, including 401(k)s, are part of these data.
According to the Fed's 1995 Survey of Consumer Finances, only 27% of households
were covered under a 401(k) plan.)
"The majority of working Americans have not benefited directly from the
rise in stock prices," said Brobeck. "In fact, more than half of all households hold
no stock," he added.
An important reason for the low net financial assets, according to Anderson, is
consumer debt. The typical household held consumer debts that totaled well over one
half of gross financial assets. Moreover, the one-fifth of households with the lowest net
assets held, by far, the highest consumer debts, most of them unsecured (mainly credit
card debt).
What is especially striking is that the one-fifth with the least financial assets
typically had middle incomes, not low incomes. The median income of this quintile was
$31,700, while the median incomes of the next two quintiles (by financial assets) were
$13,100 and $25,500 respectively. The main reason for this apparent anomaly was
consumer debt -- the typical member of this quintile held $4,700 more in unsecured
debt than in gross financial assets.
Anderson's research also found a strong relation between age and
assets/wealth. But no 10-year age cohort had large asset levels. Those 65 to 74 years
of age, the wealthiest, held median net financial assets of $12,500 and net wealth of
$97,474, most of which represented home equity. |
