The Assets and Liabilities of Cohorts: The Antecedents of Retirement Security

Published: 2013


This paper uses repeated cross-sectional data from the Surveys of Consumer Finances (SCF) to characterize cohort patterns of net worth and debt of American households.  Cohort patterns provide a useful benchmark for identifying potentially vulnerable households based on relative financial positions over time at similar ages. We also summarize attitudinal measures thought to be related to financial capability.  Both sets of descriptive data are useful in assessing the well-being of households over the life course and ultimately preparation for retirement.  We find a striking rise in debt across cohorts over time, relative to total assets and relative to income, although debt-holding declines with age as is expected. Debt is dominated by mortgages, particularly for more recent cohorts relative to similar aged cohorts 15 year prior. Tabulations of age cohorts by race or education level show predictable similar patterns. An analysis of panel data using the 2007-2009 SCF provides some support for the idea that older households lost more during the recession, as did minorities and people of higher levels of net worth. While primarily descriptive in nature, the stylized facts presented in this paper are suggestive of the trajectory for households moving into retirement age over the next decade. We do not find substantial evidence of more recent generations falling behind, nor major shifts in attitudes towards risk taking or other attitudes that might be reasonably correlated with asset or debt levels.

Key Findings

    • Households with a head born 1929-1943 (age 67-81 by 2010) and then those born in 1944-1958 (age 52-66 by 2010) had similar wealth levels at the same age/life stages. The younger group does not appear to be falling behind.
    • Households born from 1929-1943 had higher mean and median total debt at every age/life stage relative to those born 1944-1958. Debt is mainly driven by mortgages.
    • Growing debt levels for more recent cohorts of households have not resulted in lowered net worth, however.
    • Education remains a strong predictor of net wealth status with and schooling after high school associated with 4-5 times the net worth of households with high school or less education.
    • Minorities have few financial assets and their wealth is concentrated in non-financial assets such as housing.