TABLE 4.2
| Types of assets held by families, 1995–2001 | |||||||||
| [Median value in thousands of constant 2001 dollars (18.0 represents $18,000). All dollar figures are adjusted to 2001 dollars using the "current methods" version of the consumer price index for all urban consumers published by U.S. Bureau of Labor Statistics. Families include one-person units.] | |||||||||
| Age of family head and family income | Any financial asset1 | Transaction accounts2 | Certificates of deposit | Savings bonds | Stocks3 | Mutual funds4 | Retirement accounts5 | Life insurance6 | Other managed7 |
| 1Includes other types of financial assets, not shown separately. | |||||||||
| 2Checking, savings, and money market deposit accounts, money market mutual funds, and call accounts at brokerages. | |||||||||
| 3Covers only those stocks that are directly held by families outside mutual funds, retirement accounts and other managed assets. | |||||||||
| 4Excludes money market mutual funds and funds held through retirement accounts or other managed assets. | |||||||||
| 5The tax-deferred retirement accounts consist of IRAs, Keogh accounts, and certain employer-sponsored accounts. Employer-sponsored accounts include 401(k), 403(b), and thrift saving accounts from current or past jobs; other current job plans from which loans or withdrawals can be made; and accounts from past jobs from which the family expects to receive the account balance in the future. | |||||||||
| 6Cash value. | |||||||||
| 7Includes personal annuities and trusts with an equity interest and managed investment accounts. | |||||||||
| 8Value in parentheses represent median income for that percentile group. Percentile: A value on a scale of zero to 100 that indicates the percent of a distribution that is equal to or below it. For example, a family with income in the 80th percentile has income equal to or better than 80 percent of all other families. | |||||||||
| 9Median value of financial asset for families holding such assets. | |||||||||
| SOURCE: "No. 1167. Financial Assets Held by Families by Type of Asset: 1995 to 2001," in Banking, Finance, and Insurance, U.S. Census Bureau, 2003, http://www.census.gov/prod/2004pubs/03statab/banking.pdf (accessed January 4, 2005) | |||||||||
| Percent of families owing asset | |||||||||
| 1995, total | 91.0 | 87.0 | 14.3 | 22.8 | 15.2 | 12.3 | 45.2 | 32.0 | 3.9 |
| 1998, total | 92.9 | 90.5 | 15.3 | 19.3 | 19.2 | 16.5 | 48.8 | 29.6 | 5.9 |
| 2001, total | 93.1 | 90.9 | 15.7 | 16.7 | 21.3 | 17.7 | 52.2 | 28.0 | 6.6 |
| Under 35 years old | 89.2 | 86.0 | 6.3 | 12.7 | 17.4 | 11.5 | 45.1 | 15.0 | 2.1 |
| 35 to 44 years old | 93.3 | 90.7 | 9.8 | 22.6 | 21.6 | 17.5 | 61.4 | 27.0 | 3.1 |
| 45 to 54 years old | 94.4 | 92.2 | 15.2 | 21.0 | 22.0 | 20.2 | 63.4 | 31.1 | 6.4 |
| 55 to 64 years old | 94.8 | 93.6 | 14.4 | 14.3 | 26.7 | 21.3 | 59.1 | 35.7 | 13.0 |
| 65 to 74 years old | 94.6 | 93.8 | 29.7 | 11.3 | 20.5 | 19.9 | 44.0 | 36.7 | 11.8 |
| 75 years old and over | 95.1 | 93.7 | 36.5 | 12.5 | 21.8 | 19.5 | 25.7 | 33.3 | 11.2 |
| Percentiles of income:8 | |||||||||
| Less than 20 ($10,300) | 74.8 | 70.9 | 10.0 | 3.8 | 3.8 | 3.6 | 13.2 | 13.8 | 2.2 |
| 20–39.9 ($24,400) | 93.0 | 89.4 | 14.7 | 11.0 | 11.2 | 9.5 | 33.3 | 24.7 | 3.3 |
| 40–59.9 ($39,900) | 98.3 | 96.1 | 17.4 | 14.1 | 16.4 | 15.7 | 52.8 | 25.6 | 5.4 |
| 60–79.9 ($64,800) | 99.6 | 98.8 | 16.0 | 24.4 | 26.2 | 20.6 | 75.7 | 35.7 | 8.5 |
| 80–89.9 ($98,700) | 99.8 | 99.7 | 18.3 | 30.3 | 37.0 | 29.0 | 83.7 | 38.6 | 10.7 |
| 90–100 ($302,700) | 99.7 | 99.2 | 22.0 | 29.7 | 60.6 | 48.8 | 88.3 | 41.8 | 16.7 |
| Median value9 | |||||||||
| 1995, total | 18.0 | 2.5 | 11.6 | 1.2 | 10.4 | 23.1 | 19.6 | 5.8 | 34.7 |
| 1998, total | 24.5 | 3.3 | 16.3 | 1.1 | 19.0 | 27.2 | 26.1 | 7.9 | 34.3 |
| 2001, total | 28.0 | 4.0 | 15.0 | 1.0 | 20.0 | 35.0 | 29.0 | 10.0 | 70.0 |
| Under 35 years old | 6.3 | 1.8 | 4.0 | 0.3 | 5.7 | 9.0 | 6.6 | 10.0 | 40.0 |
| 35 to 44 years old | 26.9 | 3.4 | 6.0 | 1.0 | 15.0 | 17.5 | 28.5 | 9.0 | 50.0 |
| 45 to 54 years old | 45.7 | 4.6 | 12.0 | 1.0 | 15.0 | 38.5 | 48.0 | 11.0 | 60.0 |
| 55 to 64 years old | 56.6 | 5.5 | 19.0 | 2.5 | 37.5 | 60.0 | 55.0 | 10.0 | 55.0 |
| 65 to 74 years old | 51.4 | 8.0 | 20.0 | 2.0 | 85.0 | 70.0 | 60.0 | 8.8 | 120.0 |
| 75 years old and over | 40.0 | 7.3 | 25.0 | 3.0 | 60.0 | 70.0 | 46.0 | 7.0 | 100.0 |
Historically, stocks have appreciated faster than inflation has increased, allowing people to build wealth with less sacrifice than if they attempted to save money in traditional accounts. Investments can also serve as collateral for certain loans. Therefore, although Wall Street might seem far away, it provides small investors the opportunity to build wealth and prepare for retirement far more effectively than they otherwise could.
The stock market has also made it easier for employers to contribute to their employees' retirement funds. This is because many employers contribute company stocks, instead of cash, to their employees' retirement accounts. Table 4.3 shows the percentage of company stock in the retirement plans of some major companies.
Despite the inherent risks of investing, approximately ninety-two million Americans, or one out of every three people, were mutual fund shareholders as of June 2004. This is the most common type of investment, according to the Investment Company Institute (ICI). The data collected by ICI indicates that the average shareholder is middleaged, married, and college-educated. In December 2003 49% of 401(k) plan assets were held in mutual funds. As investors age, they tend to shift their 401(k) funds to more secure investments. The ICI reported that investors in their sixties had approximately 35% of their investment in equity (stock) funds.
According to the U.S. Census Bureau in Net Worth and Asset Ownership of Households: 1998 and 2000 (May 2003), African-Americans and Hispanics held a smaller percentage of their financial assets in stocks and mutual funds compared to non-Hispanic whites. In 2000 African-American households typically held only 4% of their net worth in stocks and mutual fund shares, while Hispanic households held 8.3% of their net worth, and non-Hispanic white households held 16.2% of their net worth in stocks and mutual funds. The percentage of net worth held in 401(k) and other thrift savings plans was 6.7% for African-American households, 9.6% for non-Hispanic white households, and 9.9% for Hispanic households.
As crucial as investments are for building wealth and preparing for retirement, though, they are not foolproof by any means. Some economists argue that the securities market is a relatively "perfect" market—that is, the market behaves in a predictable way in part because investors are all on equal footing—but there is no such thing as a perfect market.
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