Sunday, January 27, 2008

Retirement Assets Reach Record High Levels, in Both Dollars and As A Share of Household Assets


According to the most recent report (December 2007) on the U.S. retirement market through the second quarter of 2007 from the Investment Company Institute, the national association of U.S. investment companies including mutual funds, closed-end funds, and exchange-traded funds:

1. Total U.S. retirement assets climbed to $17.4 trillion at the end of the second quarter of 2007, up from $16.7 trillion at the end of the first quarter of 2007 (see top chart above, click to enlarge).

2. Retirement savings now account for almost 40% of all household financial assets in the United States (see bottom chart).

Conclusions:

1. As much retirement wealth was created in the last 5 years since 2002 (almost $7 trillion) as was created in the entire history of the country through 1995, when retirement wealth reached $7 trillion for the first time.

2. Retirement assets now account for nearly 40% of all U.S. household financial assets, or about twice the percentage of 20% in the mid-1980s, and more than three times the 12% share in the mid-1970s.

3. Household assets in the form of real estate have probably become much LESS important over time as retirement assets have grown in value, and real estate now accounts for a maximum of 60% of household assets, compared to a maximum of 80% during the S&L crisis and 88% during the 1970s.

Bottom Line: Not only have retirement assets reached record levels, but as I wrote in a previous post recently, household wealth has increased by almost $20 trillion in the last five years ($7 trillion due to retirement assets increasing), and the average American household now owns about $528,000 worth of stuff (assets, real estate, etc.), free and clear of any debt! In 2002, average net household wealth was about $370,000, and today it's more than half a million dollars. Therefore, in just the last five years we've become more than a third richer (+43%), which is truly amazing!

Further, real estate assets represent a smaller share of all household assets than any time in history, which could be a reason why the economy can absorb the subprime crisis.

11 Comments:

At 1/27/2008 10:54 PM, Anonymous Anonymous said...

With the devaluation of the dollar this is an illusion on a grand scale. Americans are not getting richer they are getting poorer. The wealth of the world is being transfered to the East from the West and this will only continue.

 
At 1/27/2008 10:59 PM, Anonymous Anonymous said...

The Wilshire 5000 is essentially the entire U. S. stock market. Since October 2007,three months ago, the stock market lost 19.7 percent, $3.1 trillion of wealth, 30 percent of annual GDP. We are not even close to a bottom in housing or the equity markets at this point in time.

 
At 1/28/2008 12:12 AM, Anonymous Fred said...

My retirement assets are up from 2002. My friends' retirement assets are up.

The stock market is not retirement assets. Nobody in their right mind has everything in the stock market.

You are better off not reading the papers.

 
At 1/28/2008 12:50 AM, Anonymous Anonymous said...

Average assets of $528K is pretty misleading IMHO. It's probably the case where the top 1% have $500K of this asset base.

What's the median asset base?

 
At 1/28/2008 2:12 AM, Anonymous Anonymous said...

Anonymous 12:50 AM said...

Average assets of $528K is pretty misleading IMHO. It's probably the case where the top 1% have $500K of this asset base.

What's the median asset base?


The median asset base in 2004 was $77,900 in 2004 dollars.

Get this, in 2004 the top 20% owned 84.7% of the "stuff" as Perry calls it.

(Extrapolating) That means that the bottom 80% owns on average $80,784 (15.3%) of the $528,000 of "stuff" that Perry says the average household owns.

Speaking in quintiles now the third quintile only owns on average $20,064 worth of "stuff."

The bottom two quintiles on average own $1,056 worth of "stuff."

"Stuff" is referred to as "(assets, real estate, etc.), free and clear of any debt!"

From Recent Trends in Household Wealth in the United States: Rising Debt and the Middle-Class Squeeze by by Edward N. Wolff, The Levy Economics Institute of Bard College and Department of Economics, New York University, June 2007

 
At 1/28/2008 10:24 AM, Anonymous Anonymous said...

Retirement assets are not counted in the so called "savings rate" (which is merely wages minus spending). Americans are saving and saving a lot, just not in the way that is measured by the outdated savings rate.

 
At 1/28/2008 10:56 AM, Anonymous Anonymous said...

anonymous 2:12am:

Other than the government forcibly taking my stuff and giving it to someone else, how do you propose to change the fact that some people make and have more stuff than others?

Outcomes never have and never will be equal. Get over it.

 
At 1/28/2008 11:13 AM, Anonymous Anonymous said...

I like stuff.

 
At 1/28/2008 11:38 AM, Anonymous Anonymous said...

Maybe anonymous 2:12am would pass a law that says everyone in America gets paid the same wage; regardless of what they do, their skill set, or their education.

Then life would be good, we would all live in happy land and every one would be equal.

 
At 1/28/2008 12:00 PM, Anonymous Anonymous said...

Anonymous 2:12 am here folks.

My point is that Perry is using incomplete data to try and present a misleading picture of how "ok" everyone is doing.

Anyone that reads anything more into what I wrote should go back and read it over and over again until they realize that I was presenting data and not proposing a course of action.

 
At 1/28/2008 5:06 PM, Blogger Marko said...

Stay away from my stuff. I already paid like 60k in income style taxes (income tax, fica, medicare, state income tax) for last year and can't afford a single family home where I live. Not sure how much I paid in sales taxes, gas tax, etc. Is the U.S. telling me I should go elsewhere?

 

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