Introduction

Policy makers are concerned about the wealth of U.S. families because of the relationship between wealth and economic well-being. Wealth is a store of future income that serves a critical economic security function. In times of economic hardship, such as unemployment, illness, or divorce, wealth is an additional source of income to help pay expenses and bills. For older individuals, wealth is an important source of retirement income. In addition, wealth is a significant factor influencing the strength of economy-wide consumer spending, which in turn sets the pace of economy-wide recovery and job creation. Moreover, deliberations by Congress on such issues as taxation, education, housing, and entitlements could have implications for the accumulation of wealth by families.
To help inform these policy debates, this report analyzes data from 1989 to 2013 of the Survey of Consumer Finances (SCF) on the trend in the level and concentration of wealth across families. The report subsequently examines the roles of financial assets and home ownership in wealth accumulation. It concludes with a review of explanations for the accumulation and distribution of wealth across families.

	U.S. Family Wealth

		Data and Limitations

Data regarding family wealth are very limited. Some data are available from estate tax returns, but these reflect only the small proportion of the population that is subject to the tax. The U.S. Census Bureau periodically reports on net worth and asset ownership, but the data are drawn from the Survey of Income and Program Participation, which over samples lower-income families. As a result, the Census Bureau data on wealth underestimate average (mean) and total family wealth.
The most comprehensive source of data on the wealth of U.S. families is the SCF. The Federal Reserve Board (Fed), in cooperation with the Treasury Department, sponsors the SCF. Since 1992, data for the SCF have been collected by NORC, a research organization at the University of Chicago. The survey is conducted every three years, collecting detailed statistics not only on the level, but also the composition of family assets, liabilities, and before-tax income. In the SCF, wealth is measured by net worth (i.e., total value of assets minus total value of liabilities).
The SCF counts both financial and nonfinancial (real) assets. Financial assets include the value of checking and savings accounts; stocks, bonds, and mutual funds; annuities and life insurances; and tax-deferred retirement accounts (e.g., individual retirement accounts and 401(k) accounts). Real assets include the value of principal residences, corporate and non-corporate businesses, vehicles (e.g., cars, trucks, boats, and airplanes), and miscellaneous valuables (e.g., antiques, jewelry, and coins). Liabilities include home mortgages and consumer debt (e.g., credit card balances and auto and student loans).
Because of the substantial uncertainty associated with estimating the current value of families' future income streams from Social Security, Medicare, and defined benefit private pensions, these assets are not included in the SCF calculation of family net worth. Some argued that these are assets families have no direct control over and, therefore, are inconsistent with a concept of wealth as a marketable store of value that could be a source of potential consumption. The SCF has been criticized for these exclusions. Others have argued that some items the SCF counts toward net worth (e.g., vehicles) should be excluded. At least one researcher has constructed estimates of net worth that include pension and Social Security benefits, but exclude vehicles.
To improve the accuracy of its data, the SCF uses a sample design consisting of two parts: (1) a standard, geographically based random sample and (2) a supplemental oversample of relatively wealthy families drawn from a list of statistical records derived from Internal Revenue Service (IRS) data. The over sampling of these families provides a means of correcting for nonresponse, which is differentially higher among families with high net worth. Correcting for nonresponse bias in wealth estimates makes the SCF better able than other surveys to gather complete and detailed information on high-income and high-net worth families.

		Median and Mean Family Net Worth

Two summary measures commonly used to describe the level and concentration of wealth are median and mean net worth. If all wealth-owning families are ranked from poorest to richest, median net worth is that of the family in the middle of the distribution. Put another way, it is the value at which one-half of families in the distribution have less wealth and one-half have more wealth. In the case of wealth distribution, the median is a more reliable indicator of the wealth of the "typical" family than the mean because of the way in which a mean is calculated. To derive mean net worth, the value of all wealth owned by families is added up and then divided by the total number of families. If a minority of high-wealth families own more than one-half of all wealth, the mean will be greater than the median. The difference between the median and mean indicates the general shape of a distribution.
According to SCF data shown in Table 1 , mean family net worth in each year was substantially greater than median net worth. The mean ranged from almost four to more than six times the median during the 1989-2013 period. As explained above, such a relationship indicates considerable concentration of wealth among families in the upper half of the wealth distribution.
Mean family net worth typically increased to a greater extent than median family net worth from 1992 through 2007, which suggests that the wealth distribution became more concentrated at the upper end of the distribution over time. Since 2007, reflecting the negative impact of the deep 2007-2009 recession and the subsequent slow recovery on income and asset prices, both measures decreased (see Table 1 ). Between 2007 and 2013, median family net worth declined by 40.0% and mean net worth declined by 14.6%. The median declining less than the mean indicates net worth decreased more, on average, for those in the lower half of the wealth distribution. 
The decrease in median net worth to $81,200 in 2013 dropped median family wealth almost to its level 21 years earlier ($80,500 in 1992). Mean net worth of $534,600 in 2013 was essentially unchanged from its value in 2010, remaining near the level of net worth reached 12 years earlier ($521,900 in 2001).
That median net worth declined and mean net worth was unchanged between 2010 and 2013 was the result of a continuing general decline in asset prices, notably housing prices. The median family's total asset holdings fell 11%, from $200,600 in 2010 to $177,900 in 2013. The mean total asset holdings fell a more modest 3%, from $656,200 in 2010 to $638,900 in 2013.
Helping to offset falling asset prices' negative effect on net worth was a substantial decrease in families' debt holdings between 2010 and 2013. The median family's debt holdings fell 20%, from $75,800 in 2010 to $60,400 in 2013. The mean value of debt holdings decreased 13%, from $140,000 in 2010 to $122,300 in 2013.

		Share of Total Net Worth by Percentile of Wealth Owners

A more detailed picture of the distribution of family wealth emerges from examining the share of total net worth held by various percentiles of the wealth distribution. The top 3% of families accounted for 54.4% of total net worth in 2013. The next 7% of families held 20.9% of all wealth. Taken together then, the top 10% of wealth-owning families accounted for a 75.3% share of total net worth, and the share of wealth held by the bottom 90% was 24.7% in 2013.
Family net worth appears to have become more concentrated in recent decades. According to SCF data, the wealth share of the top 3% increased from 44.8% in 1989 to 51.8% in 2013. The share of net worth of the next 7% was 20.9%, effectively unchanged since 1989. Therefore, taken together the share of wealth held by the top 10% of wealth owners grew from 67.2% in 1989 to 75.3% in 2013. A decline in the share of net worth occurred in the remaining 90% of families, falling from 33.2% in 1989 to 24.7% in 2013.

	Asset Prices and Wealth

In addition to accumulating wealth through saving of current income, those who own assets may see their wealth grow or shrink due to rising or falling asset prices. The distribution of such assets as stocks and homes has implications for who benefits from asset appreciation and who is harmed by asset depreciation.

		Stock and Housing Price Appreciation, 1989-2007

The appreciation of stock values during the 1990s and of home values into the first decade of the 21 st century appears to have substituted for saving from current income as a means of increasing family wealth. A number of studies estimated a close connection between the decline in the household saving rate during the 1990s and the rapid rise in equity prices. Empirical analyses similarly estimated that appreciation in housing prices through the mid-2000s drove up the value of residential assets, which substituted for saving out of current income as a way to accumulate wealth.
The median value of stock owned by families tripled in real terms between 1989 and 2001. Once equity prices stopped steadily increasing after 2000, the rapid rise in housing prices through 2006 appears to have kept the saving rate low. Whereas the real median value of stock fell by 16% between 2001 and 2007, the median value of primary residences rose by 39% over the same period.
Although the share of families owning their primary residences grew much less (5 percentage points to 69%) than the share of families directly owning stock (19 percentage points to 51%) between 1989 and 2007, residential assets are more widely distributed than stock. In 2007, the wealthiest 10% of families held 38.5% of the gross equity in principal residences compared with 90.4% of the value of stock. Families in the next 40% of the distribution (the 50 th to 90 th percentile) held 48.9% of the gross equity in principal residences compared with 9.0% of the value of stock. Thus, if appreciation in house prices substituted for saving out of current income, it did so for a much larger proportion of the population than did stock price appreciation. Specifically, families in the upper half of the wealth distribution stood to benefit more than others from rising house prices whereas the top 10% of wealth-owning families stood to benefit the most from rising stock prices.

		Stock and Housing Price Depreciation, 2007-2010

The 2007 SCF was completed as the economy entered a financial crisis. Because results from the 2010 SCF were not going to be available until 2012, respondents to the 2007 survey were reinterviewed shortly after the December 2007-June 2009 recession ended to assess its impact on the wealth of U.S. families.
According to results (released in March 2011) from the reinterview of SCF families who had originally been interviewed in 2007, 63% of families (the majority) experienced a loss in net worth between 2007 and 2009. The median percentage decrease in net worth among these families was 45%.
The broad-based downward shift of the wealth distribution between 2007 and 2009 was reflected in reductions in median and mean summary measures. The drop in median net worth (23%) was greater than the drop in mean net worth (19%), which suggests that the balance sheets of families in the lower half of the wealth distribution were proportionately more adversely affected by the 2007-2009 recession than those further up the distribution.
Among financial assets, the median value of stocks fell most sharply (23%) during the recession. Nonfinancial assets experiencing declines in median value comparable to stocks included vehicles (26%), business equity (24%), and equity in nonresidential property (23%). Although the median value of primary residences fell by a smaller percentage (12%), primary residences' absolute value dropped by $18,700 (expressed in 2009 dollars), much more than that of any other financial or nonfinancial asset.
Decreases in the value of home equity and stocks as well as business equity all contributed to the overall decline in net worth during the 2007-2009 recession. Further, there was a change in the composition of assets held by families. Primary residences as a proportion of total assets fell by 1.5 percentage points. Stocks' and business equity's share dropped by 4.7 percentage points. However, with homes being a much more widely held asset than stocks and business equity, housing price depreciation appears to have had the larger role in changes in family net worth during the recession, according to data from the 2009 reinterview of 2007 SCF families.
Results from the 2010 SCF provide statistical evidence in support of the respective roles of house and stock price depreciation in reducing net worth since 2007. "Although declines in the values of financial assets or business were important factors for some families, the decreases in median net worth [between 2007 and 2010] appear to have been driven by a broad collapse in house prices." 

		Stock Prices Rebound, but Housing Prices Fall Further, 2010-2013

Results from the 2013 SCF indicate that the pattern of change in asset values since 2010 of a decreased median and unchanged mean (discussed above) is a major factor behind the behavior of total net worth in this most recent period. The value of the median family's total asset holdings fell another 11%, from $200,600 in 2011 to $177,900 in 2013. The mean value of asset holdings fell a more modest 3%. The larger drop in median than in mean asset holdings indicates that gains and losses in asset values were unevenly distributed across families. The median value of stocks, which are only held by about 14% of families, increased 26% from $21,400 in 2010 to $27,000 in 2013; and the mean value of stock holdings increased 31% from $224,800 in 2010 to $294,300 in 2013. In contrast, the median and mean value of families' primary residence, an asset held by 67.3% of families, both fell. The median value of primary residences decreased 7%, from $182,200 in 2010 to $170,000 in 2013; and the mean value decreased 6%, from $280,100 in 2010 to $262,600 in 2013.

	Factors Potentially Affecting the Accumulation and Distribution of Family Wealth

Researchers often use the distribution of income as a starting point for understanding the accumulation and distribution of wealth. Higher income families are generally better positioned to set more aside, and thus accumulate greater wealth, than those at the lower end of the income distribution. As shown in Table 2 , four of every five families in the top 10% of the income distribution saved in 2013 compared with one of every three families in the bottom 20% of the income distribution.
Despite income and wealth generally increasing in tandem, wealth is more concentrated than income. The ratio of the mean to median is an indicator of the degree of concentration in a distribution because, as previously mentioned, the mean can be greatly affected by a few high-value observations. Evidence from the 2013 SCF indicates that families' mean income was 1.9 times more than median income whereas families' mean net worth was 6.6 times more than median net worth—almost 3.5 times the mean to median income ratio. The larger mean-to-median ratio reflects the survey result that wealth is more concentrated than income among families at the upper end of the respective distributions.
Analysts have sought explanations for the greater concentration of wealth than income across families. A common explanation is that as individuals' incomes rise during their working lives they save (accumulate wealth) for their retirement years. Upon retirement, income falls and so does saving as retirees draw down wealth to maintain living standards. However, empirical studies have estimated that saving for retirement cannot completely explain people's saving behavior and the higher concentration of wealth than income.
Researchers added to their statistical model of savings behavior a variable for unpredictable events (e.g., job loss and divorce) that, like retirement, could reduce an individual's standard of living. They estimated that saving for so-called precautionary reasons contributes to but does not fully explain a distribution of wealth that is more concentrated than the distribution of income.
As a result, analysts have sought other explanatory variables. Entrepreneurship is one such factor. Although business owners (the self-employed or entrepreneurs) are a small proportion of the population, the group comprises a much larger share of the wealthiest families—more than one-half of the top 1% of the wealth distribution. Researchers estimated that entrepreneurs are more motivated than others to save because they encounter difficulty borrowing funds to start or expand firms. In other words, those who want to start their own businesses have learned they typically need to fund it from their own savings.
Another contributory factor may be the desire of wealthier families to bequeath assets to their children. Analysts estimated that this desire prompts wealthy families to save at a high rate and helps to explain why families in the upper end of the wealth distribution even in old age do not consume all their assets. Researchers further suggest that bequests take the form not only of financial capital (i.e., assets), but also of human capital (i.e., years of education). Wealthy parents may be able to pass on greater earnings abilities to their children because wealthier families are less affected by educational borrowing constraints than families further down the wealth distribution. In other words, wealthy parents can more easily finance their children's post-secondary education compared with parents who have amassed less savings, increasing the probability that children of the wealthy will earn more, save more, and accumulate more wealth.

Summary:
U.S. family wealth has been an underlying consideration in congressional deliberations on various issues, including education, taxation, social welfare, and recovery from the 2007-2009 recession. This report analyzes the change over time in the level and concentration of family wealth as measured by net worth (i.e., assets minus liabilities) to help inform those policy deliberations.
According to the Federal Reserve's latest Survey of Consumer Finances (SCF), in 2013, mean family net worth was $534,600 and median family net worth was $81,200. The median is the value at which one-half of wealth-owners have lower values and one-half have higher values of wealth. The median is a more reliable indicator of the wealth of the "typical" family than is the mean, which, because of the way in which the mean is calculated, can be greatly affected by a relatively small number of families with high values of net worth. Mean family net worth is more than six times median family net worth, which suggests a concentration of wealth among families at the upper end of the wealth distribution.
The change over time in the relationship between the mean and median indicates how the distribution of wealth across families has changed. Both mean and median net worth increased from 1989 to 2007, with the mean typically increasing to a greater extent than the median. This suggests that in recent decades wealth became more concentrated among families at the upper end of the distribution. Both measures fell between 2007 (the outset of the 2007-2009 recession) and 2010 (the first full year of recovery). The relatively greater decline in the median than in the mean between 2007 and 2010 suggests that the recession and slow recovery had a proportionately greater effect on families in the bottom half of the wealth distribution than those further up the distribution.
According to a September 2014 article in the Federal Reserve Bulletin, which presents data from the 2013 SCF, "The improvements in economic activity along with changes in house and corporate equity prices combined to effectively stabilize average and median family net worth between 2010 and 2013 after both measures fell dramatically between 2007 and 2010."