There’s a growing segment of the American population that earns a decent salary but lives paycheck-to-paycheck: the income-rich and asset-poor.
Empty bank balances are often associated with those on the lowest rungs of the income ladder. But many members of America’s upper-middle class have almost no emergency cushion and are woefully unprepared for retirement. And years into the recovery, they are still struggling, leaving the entire economy vulnerable.
The median household income in America is about $55,000. To earn more than that is to do relatively well, particularly in low-cost areas. That’s what they bring in, but what do they really have? The figure below plots financial assets held by members of the upper-middle class aged 40 to 55. (Financial assets are any assets a household owns that isn’t a house, car, or business, which means it includes all retirement funds.)
Average Value of Household Assets, by Household Income
Even a relatively high earner who has been working many years typically only has $70,000 in financial assets, which isn’t even a year’s salary for a high earner. That’s just the average—about 25 percent of upper-middle-class 40- to 55-year-olds have less than $17,500 in financial assets. Financial assets trended up in the 1990s, and have nearly recovered since the financial crisis. But one reason asset balances went up is the increased popularity of 401(k) plans. In the 1980s, companies saved for their employees through defined-benefit pensions. Now, people do it for themselves.