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Changes in Family Finances Outlined in Federal Reserve Report September 17, 2014

Posted by shaferfinancial in Finance.
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The Federal Reserve’s report of changes in Family Finances 2010-2013 documents the continuing startling financial condition of families in the US. Here are the top line numbers:
Median Family Income Fell 5% to $46,700. That is on top of a 8% decline in the previous 3 year period. So median family income has fallen 13% in the last 6 years.  Mean family income rose in the latest period 4% indicating a widening of the income differential between the top tier and the balance. This differential has been consistent over the last decade.
Median Net Worth also fell 2% to $81,200. Interestingly, is the median amount of net worth for those with income in the 80-90% category is only $288,000 a drop of 11%. For comparison the upper 10% has a median net with of $1,126,000 and the 70%-80% income group had a net worth of $161,300. So in reality the only folks who have a total net worth of over $1M are the ones making the top 10% of income [$223,000 of family income]. This is really bad news for the country as only 10% have the means to retire with a decent retirement income. Further driving home this point is the median net worth of 55-64 year olds of $165,900. Families in the upper middle class or between 75th and 90th percentile had a median net worth of $505,800 a 3% drop. For comparison the top 10% median net worth is $1.8M while the 50-75% grouping has a median net worth of $168K. Most of this net worth is in principal residences not retirement savings.

Roughly half of US families have retirement accounts and the median value is $49,200 [remember that the market just had a +32% year which should have pushed up 401K values significantly]. Roughly 15% of families own individual stocks with a median value of $27,000 and about 9% have mutual funds outside their retirement accounts with a median value of $80,000. About 20% have cash value life insurance with a median value of $8,000.

The mean level of retirement accounts [for some reason they don’t report median level on this measure] for folks in the 50-90% income level is $147K. No doubt the median level would be much lower. The top 10% of income earners have a mean retirement account level of $446K.

Some quick comments on debt; the debt to income level decreased to 107% from 118% indicating lower level of overall debt. The one area of debt that is increasing, and doing so dramatically is student loan debt.

Overall we see stagnating incomes outside the top 10%, and extremely low levels of retirement savings and assets among all those in the below 75% of income. And even up to the 90% income level strikingly unprepared folks for retirement.



1. Joshua Andrews - September 17, 2014

My eyes were already wide open. But, having read this depressing report.. it made my pupils dilate.

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