Net worth of U.S. households

February 8, 2000

ANN ARBOR—The net worth of the average American household rose by 15 percent in the last 10 years, according to a University of Michigan study. But the net worth of households headed by Americans under the age of 60 actually declined, while that of households headed by those age 60 and older increased by 30 percent.

Tables regarding the study are available in .PDF format (Acrobat software needed) at (click on “What’s New,” then “CROSS-SECTIONAL WEALTH AND FINANCIAL WEALTH”).

And for every dollar of wealth accumulated by white families, Black families had just nine cents.

The findings are the latest from the Panel Study of Income Dynamics, conducted at the U-M Institute for Social Research (ISR), the world’s largest academic survey and research organization. Funded in part by the National Science Foundation and the National Institute on Aging, the study has been tracking a nationally representative sample of approximately 5,000 U.S. families every five years since 1968.

“At first glance, it’s shocking to see that household wealth actually dropped for younger and middle-aged Americans, while it rose for those age 60 and over,” says Frank Stafford, an economist at the ISR and the principal investigator of the study. “But our measures of net household wealth do not include pension plans, and households in their 40s and 50s with pension wealth may be responding to the capital gains in defined contribution plans by reducing other forms of saving.

“Still, there’s no question that the stock market boom of the 90s fueled the sharp growth in net wealth of older Americans. The figures for household financial wealth—defined as stocks, bonds and other liquid assets, minus the equity in homes and cars—clearly show this. Older households almost doubled their financial wealth in the last five years, from an average of $18,500 in 1994 to $35,500 in 1999.”

Education, as well as age, was linked with big gains in net wealth, Stafford notes. Among those with a college degree or more, household wealth grew by 20 percent to $137,100 in 1999 from $110,200 in 1994. Financial wealth accounted for much of the increase.

Financial wealth also plays a major role in the growing gap between the net worth of Black and White Americans, Stafford notes. “Black wealth rose modestly up to 1994, then stalled out with a slight decline in 1999,” he says. “But the time trends in the wealth patterns for Blacks and Whites pale in comparison to the wealth gap at any given point in time over the last 15 years,” he says. “In 1999, for example, for every dollar of wealth held by the average white household, the average Black household held barely 9 cents.”

Low levels of stock market holdings by Blacks, even after controlling for income and wealth, are part of the problem, according to Stafford. In 1999, as many as 71 percent of white households held wealth in the form of stock and Individual Retirement Accounts, compared with only 17 percent of Black households.

But low Black wealth is not simply a reflection of low levels of stock market and I.R.A. holdings. More than income, wealth is a result of inter-generational transfers, Stafford notes, with some studies suggesting that as much as 70 percent of all household wealth is passed down from the previous generation. “Wealth is a complex combination of saving incentives and transfers into and out of a household over the entire life of that household, as well as that of generations that came before,” he explains.

The flattening Black wealth trajectory revealed by the study might also be connected to welfare reform and increased confidence in the solvency of Social Security and the economy, in general. “Black households nearing retirement may have more financial responsibilities to their children than they had intended, as a result of welfare reform,” Stafford speculates. “Alternatively, if Black households feel more confident about the economy in general, about Social Security in particular, or about their ability to earn a good income both now and in the future, then they might feel less of a need to maintain a ‘buffer-stock’ of wealth. One of the reasons people save and try to build up wealth is precautionary.”

For more information about the Panel Study of Income Dynamics, visit the study Web site at

Established in 1948, the Institute for Social Research (ISR) is among the world’s oldest survey research organizations, and a world leader in the development and application of social science methodology. ISR conducts some of the most widely-cited studies in the nation, including the Survey of Consumer Attitudes, the National Election Studies, the Monitoring the Future Study, the Panel Study of Income Dynamics, the Health and Retirement Study, and the National Survey of Black Americans. ISR researchers also collaborate with social scientists in more than 60 nations on the World Values Surveys and other projects, and the Institute has established formal ties with universities in Poland, China, and South Africa. Visit the ISR Web site at for more information. Study of Income of Consumer Attitudes