Most households have seen their median net worth decline significantly since the recession. The median household net worth (the value of assets minus debts) declined 35 percent between 2005 and 2010, from $102,844 to $66,740, according to recently released Census Bureau data.
"The overall decline in net worth reflects drops in housing values and stock market indices," says Alfred Gottschalck, a Census Bureau economist.
While the median net worth decreased for all age groups, older households lost the most money. Among households headed by someone age 65 or older, median net worth decreased by $25,762, from $195,890 in 2005 to $170,128 in 2010. In contrast, people under age 35 watched their net worth decline from $8,528 to $5,402, a loss of $3,126.
However, if you look at these losses as percentages, young households lost 37 percent of their wealth, while senior citizens lost 13 percent of the value of their assets. Families headed by someone between age 35 and 44 suffered the greatest losses, of 59 percent of their wealth over the five-year period.
While the typical household headed by someone age 65 or older had a net worth of $170,128 in 2010, most of that wealth is in the form of home equity. "The run-up in housing values created a lot of wealth, but then the housing market decline took away a lot of that wealth," says Gottschalck. "When you take away home equity out of the net worth, wealth has remained relatively constant." If home equity is excluded from the calculation, the median senior-citizen household had a net worth of just $28,518 in 2010, down from $31,575 in 2005.
Retirees hold their non-housing wealth in a variety of places. Seniors citizens had a median of $95,000 in 401(k)s, IRAs, and similar types of retirement accounts in 2010, which is up from $72,700 in 2005. However, the median amount invested in stocks and mutual funds declined from a median of $50,000 in 2005 to $45,000 in 2010. Some retirees also have equity in a business, motor vehicle, rental property, real estate, or other assets that bring in additional income.
Many retirees kept smaller amounts of money in safer investments, including checking accounts ($956), interest-earning assets at financial institutions ($5,000), and savings bonds ($1,000) in 2010. "A lot of these households have their money in interest-bearing accounts," says Karen Dynan, a senior fellow at the Brookings Institution. "Interest income has been extremely weak. People who are living off of savings accounts that are paying interest are at the losing end."
Married couples age 65 or older had a net worth of more than twice that of single seniors. "You have more people in a household and therefore you are going to have a higher net worth," says Gottschalck. Retired couples were worth a median of $307,728 in 2010, compared to a net worth of $112,765 for single women and $142,060 for unmarried older men.
Other studies have also found significant declines in retiree net worth. The Federal Reserve's most recent Survey of Consumer Finance, released last month, found that the median net worth of households headed by someone between age 65 and 74 declined from $250,800 in 2007 to $206,700 in 2010, which is below the $217,800 net worth this age group had in 2001. "Both declines in the value of financial assets, including retirement accounts and declines in the value of housing, contributed to the decline in net worth between 2007 and 2010 for families headed by a person 65 years or older," says Jesse Bricker, an economist for the Federal Reserve Board and co-author of the report.
Retirees who have already left the workforce have few options to increase their net worth. "The older households that are owning stocks probably already have seen some recovery in their net worth," says Dynan. "Home prices haven't gone anywhere in many parts of the country. For households for whom the home was the main way in which they had saved, those households have not seen much of a recovery, and it's unclear how much of a recovery they are going to see."