How Financially Fit Are American Retirees?

How has the financial position of U.S. retirees evolved over time?

In a May 2019 analysis, St. Louis Fed Economist and Research Officer YiLi Chien and Research Associate Qiuhan Sun explored that question by comparing the state of current retirees’ household wealth with that of past retirees.

In their Regional Economist article, Better than Ever? The Wealth of Retired Households, the authors examined the balance sheets of households headed by retirees in 2016 with those of households headed by retirees in 2001 and 1989.

They used data available from the Federal Reserve’s Survey of Consumer Finances (SCF).For definition purposes, “retirees” are considered those households whose heads were 65 years or older in a given SCF year.

To gauge how retired households past and present have fared, Chien and Sun looked at the composition of their assets—both financial (e.g., investments) and nonfinancial (e.g., housing)—as well as their liabilities.

Overall, the authors concluded that both “the average and median inflation-adjusted wealth of retirees has been increasing over time.” And they dove deeper into the average and median values for additional insights.

Average Value of Retiree Assets Grew Significantly

• The authors noted that the average value of asset holdings among retirees more than doubled between 1989 and 2016, after adjusting for inflation.All dollar figures are expressed in 2016 dollars.
• Retirees in 1989 held an average of $520,000 worth of assets.
• Retirees in 2001 held an average of $806,000 worth of assets.
• Retirees in 2016 held an average of $1.12 million worth of assets.

They also observed a considerable rise in average net worth. Assets and net worth averages can be seen in the figure below.

“Overall, we see that the average size of assets among retirees grew significantly over time, while the size of debt rose only slightly; thus, liabilities remained a smaller share of retirees’ total assets,” Chien and Sun wrote, noting that long-term domestic economic growth “mostly drove this substantial increase in retirees’ wealth.”

Median Assets Saw a Substantial but Slower Increase

The authors also examined the median (or midpoint) value of assets, liabilities and net worth. They noted that median total assets among households headed by retirees grew “substantially”:

• The median asset value among retirees in 1989 was $151,000.
• The median asset value among retirees in 2001 was $240,000.
• The median asset value among retirees in 2016 was $301,000.

And since the median retiree had little to no debt during this time, median net worth also increased substantially—from $145,000 in 1989 to $246,000 in 2016, the authors noted. This can be seen in the figure below.

Still, the authors noted, differences between average and median values may offer a window into the issue of wealth inequality.

“Rising average wealth among retirees may not necessarily benefit everyone. As documented by economists Emmanuel Saez and Gabriel Zucman, wealth inequality is very significant in the U.S. and has worsened in recent decades,” they wrote. “If wealth inequality among retirees also worsens over time, then wealth becomes more concentrated among a smaller fraction of retirees, which may prevent the majority of retirees from enjoying the benefits of economic growth.”

Chien and Sun pointed out that the increase in median total assets and net worth was large, but still smaller than the rise in average assets and net worth. “The slower increase in the median relative to the average indicates that wealth inequality worsened,” they wrote.

Notes and References

1. For definition purposes, “retirees” are considered those households whose heads were 65 years or older in a given SCF year.
2. All dollar figures are expressed in 2016 dollars.

Additional Resources

• On the Economy: Retirement Plans among Pre-retirement U.S. Households
• On the Economy: How Do People Handle Financial Emergencies?
• Open Vault: What Wealth Inequality in America Looks Like: Key Facts & Figures