Personal Finance > Millionaire in the Making
Wealth survey: How do you stack up?
Latest Fed survey finds financial picture has improved for many, though gains were far from equal.
January 23, 2003: 12:04 PM EST
By Jeanne Sahadi, CNN/ Staff Writer

NEW YORK (CNN/Money) - As a whole, people living in the United States in 2001 were richer, earned more money, owned more stock and had debt levels that were less as a percentage of total assets than in 1998.

But not everybody enjoyed similar increases in wealth and income nor did everyone enjoy more manageable levels of debt. In terms of net worth, for example, the highest earners saw the biggest improvement by far.

Those are just a few of the findings from the Federal Reserve's triennial Survey of Consumer Finances, results from which were released Wednesday. From May through December 2001, the Fed surveyed 4,449 families as a representative sample of the 106.5 million families in the United States at that time.

Net worth rises

In terms of net worth (measured as the difference between a family's gross assets and their liabilities), the median level of wealth of all families rose 10.4 percent to $86,100 from $78,000 in 1998. Notably, the 2001 level was up 40.5 percent from the overall median net worth in 1992, which was $61,300.

All income groups had a rise in median net worth, but those in the top 10 percent enjoyed the biggest jump -- 69.3 percent -- to $833,600 from $492,400 in 1998. Those in the bottom 20 percent of income earners, by contrast, saw their median net worth increase by 25.4 percent to $7,900.

Here's another way to view the inequality in the growth of wealth: In 1998, the median net worth of the top 10 percent of income earners exceeded the median net worth of the bottom 20 percent by $486,100. In 2001, that difference ballooned to $825,700.

By adjusting the 2001 results to reflect the value of equities and businesses on Oct. 4, 2002, researchers found the overall median net worth in the country was reduced to $80,700.

But since the wealthiest families were far more likely to own stocks than other families, they were disproportionately affected by the adjustment. In other words, those at the 95th percentile of net worth saw their wealth fall 14.8 percent from the 2001 measured value; those at the 90th percentile saw a decline of 11.9 percent; and those in the 75th percentile saw a drop of 7.8 percent.

Income and savings improve

In terms of family income, the median (which is the middle point, meaning half of all families earned more) rose 9.6 percent to $39,900, while the mean family income (which is the average taken by dividing total income by the total number of families) rose 17.4 percent to $68,000.

However, some groups did not enjoy a significant rise in median income. (The survey broke down respondents into groups defined by age, race or ethnicity, income, education, employment status, region, home ownership and net worth.)

For example, heads of household between the ages of 45 and 54 saw their median income decline to $54,500 from $55,200; and nonwhite or Hispanic heads of household had median incomes that were up only slightly, to $25,700 from $25,400.

Regionally, earners who lived in the North Central region (Illinois, Indiana, Michigan, Ohio, Wisconsin, Iowa, Kansas, Minnesota, Missouri, Nebraska and the Dakotas) enjoyed the fastest growth in median income, to $43,900 from $35,800.

In terms of savings, 59.2 percent of all families -- the highest level since 1992 -- said they saved in the preceding year, up from 55.9 percent in 1998.

More families exposed to stocks

Even with the bear market sinking its claws into investors starting in 2000, the median value of stock holdings increased 5.3 percent between 1998 and 2001. Median stock holdings in 2001 rose to $34,300 from $27,200 in 1998.

And 51.9 percent of families had either direct ownership of stocks or indirect ownership (which is defined, for example, as owning stocks via mutual funds or retirement accounts). That's the highest percentage recorded by the Fed since it started regularly tracking stock ownership in 1983.

Still, the highest income earners held a disproportionate amount of stocks, with ownership rates highest among families in the top 40 percent of income distribution.

Interestingly, however, in terms of measuring stock holdings as a percentage of total financial assets, those in the top 10 percent of income earners were the only ones to show a decline. That is, those with the biggest paychecks nationally held less in stocks in 2001 as a percentage of their total financial assets (which include bonds, CDs, bank accounts and life insurance).

In terms of homeownership, the number of families who owned their primary residence rose to 67.7 percent from 66.2 percent in 1998. The median value of a home rose 12.1 percent to $122,000.

Fewer families -- 11.3 percent, down from 12.8 percent in 1998 -- owned second homes, time shares or rental properties.

Debt-to-assets ratio drops

Although the median family's assets and debts both grew between 1998 and 2001, growth in asset value outpaced the rise in debt. As a result, the ratio of family debts to assets fell to 12.1 percent from 14.3 percent. That's the lowest level since 1989.

Of the 75.1 percent of families who had some type of debt, the overall median value of debt rose 9.6 percent to $38,800.

Home-secured debt (such as mortgages and home equity loans) accounted for the biggest piece of overall debt: 75.1 percent, up from 71.3 percent in 1998. While that portion rose, so, too, did home values, increasing owners' equity.

Credit card debt, meanwhile, accounted for only 3.4 percent of the median debt pie (down from 3.9 percent in 1998). Less than half of families surveyed -- 44.4 percent, a slight increase over 1998 -- carried credit card balances, and the median balance was $1,900, the same as in 1998.

In terms of delinquency, the picture improved overall. The proportion of debtors who were 60 or more days late in paying their loans fell to 7 percent from 8.1 percent in the last survey.

Still, some groups showed signs of increased debt distress. The percentage of families in debt who paid their loans late by 60 or more days rose for those families in the lowest 20 percent of income; for families headed by someone under age 35; for families whose net worth fell in the bottom 25 percent and for families who were renters.  Top of page

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