At a Glance
In this report, the Congressional Budget Office examines changes in the distribution of family wealth (a family’s assets minus its debts) from 1989 to 2022. Building on earlier work, CBO used an expanded measure of wealth that includes families’ projected Social Security retirement and disability benefits.
- Total Wealth. Adjusted for inflation, the wealth held by families in the United States almost quadrupled between 1989 and 2022, rising from $52 trillion (in 2022 dollars) to $199 trillion, at an average rate of about 4 percent per year. In 2022, retirement assets and accrued Social Security benefits made up about 40 percent of wealth. Nonretirement financial assets, home equity, and other assets made up the rest.
- Concentration of Wealth. Over that 33-year period, family wealth was unevenly distributed, and that inequality increased. In 2022, families in the top 10 percent of the distribution held 60 percent of all wealth, up from 56 percent in 1989, and families in the top 1 percent of the distribution held 27 percent, up from 23 percent in 1989. The share of wealth held by the rest of the families in the top half of the distribution shrank from 37 percent to 33 percent over the same period. Families in the bottom half of the distribution held 6 percent of all wealth in both 1989 and 2022.
- Value of Accrued Social Security Wealth. In 2022, accrued Social Security wealth accounted for 20 percent of families’ total wealth—up from 17 percent in 1989. Together, defined contribution and defined benefit pension plans accounted for a similar share, 21 percent. Throughout the period, Social Security wealth accounted for a larger portion of assets among families who had less wealth.
- Changes in Wealth During the Coronavirus Pandemic. From 2019 to 2022, total family wealth increased by 17 percent, from $170 trillion to $199 trillion (in 2022 dollars), and median family wealth increased by 8 percent, from $466,500 to $504,000. Wealth inequality changed little during the pandemic: Throughout that period, the share of wealth held by families in the top 1 percent of the distribution remained at 27 percent.
- Differences From CBO’s Previous Studies of Family Wealth. In 2016, CBO published a report that defined family wealth as a family’s marketable wealth—that is, its easily tradable assets minus its debts—and in 2022, CBO published a report that defined family wealth as the sum of a family’s marketable wealth and its promised income from defined benefit pension plans. This report updates those prior analyses with more recent data and expands the measure of wealth to account for future streams of income from Social Security benefits.
Notes About This Report
Numbers in the text, tables, and figures may not add up to totals because of rounding.
Throughout this report, family wealth is expressed in 2022 dollars. To remove the effects of inflation, the Congressional Budget Office adjusted all dollar amounts for years before 2022 using the price index for personal consumption expenditures from the Bureau of Economic Analysis.
Unless otherwise noted, estimates of family wealth in this report include Social Security wealth—the present value of a family’s future stream of income from Social Security benefits as scheduled under current law—and the distribution of wealth is defined by that measure.
All of the figures in this report present CBO’s data, which were produced using data from the Survey of Consumer Finances, Forbes magazine, the Current Population Survey, and the Financial Accounts of the United States. Shaded vertical bars in some figures indicate periods of recession, which extend from the peak of a business cycle to its trough.
For definitions of key terms and measures used in the report, see Appendix A. For a discussion of the data sources and methods underlying the analysis and other technical details referenced throughout the report, see Appendix B. For a discussion of how using alternative measures of Social Security wealth would change CBO’s estimates of family wealth, see Appendix C. For a discussion of how demographic changes may have affected family wealth, see Appendix D.
Summary and Introduction
In 2022, the wealth held by all families in the United States totaled $199 trillion—about eight times the nation’s gross domestic product, or GDP. Average family wealth was $1.5 million, and families at the median, or midpoint, of the wealth distribution held $504,000, the Congressional Budget Office estimates. This report examines trends in the overall distribution of family wealth from 1989 to 2022, the first and last years for which comparable survey data on family wealth are available. The report describes changes in real wealth—that is, wealth adjusted to remove the effects of inflation; dollar amounts are reported in 2022 dollars.
CBO measured family wealth as the sum of a family’s marketable wealth (often referred to as net worth), the value of its promised income from defined benefit pension plans (referred to here as defined benefit wealth), and the value of its future income from the Old-Age, Survivors, and Disability Insurance program (referred to here as Social Security wealth). See Appendix A for definitions of those terms and others used in this report.
How Was Wealth Distributed in 2022?
In 2022, families in the top 10 percent of the wealth distribution held 60 percent of all wealth, and families in the bottom half held 6 percent. The average wealth of families in the top 10 percent of the distribution was $9.1 million; for families in the 51st to 90th percentiles, it was $1.3 million; for families in the 26th to 50th percentiles, it was $316,000; and for families in the bottom 25 percent of the distribution, it was $74,000. (Percentiles divide a range of observations into 100 groups; a percentile’s value indicates the percentage of observations that fall below it.)
The composition of families’ wealth varied depending on their position in the wealth distribution:
- Retirement assets and nonretirement financial assets made up larger shares of wealth for families in the top half of the distribution; home equity made up a larger share for families in the bottom half.
- Social Security wealth accounted for more than 40 percent of the assets of families in the bottom half of the distribution and almost half of the assets of families in the bottom 25 percent.
- Families in the bottom half of the distribution had more debt in relation to assets than families in the top half.
- Overall, 2 percent of families in the United States had negative wealth (that is, their debt exceeded the sum of their marketable wealth, defined benefit wealth, and Social Security wealth), and 8 percent had negative net worth (that is, their debt exceeded their marketable wealth).
The share of wealth held by families in the top 10 percent of the distribution is larger—and the share of wealth held by families in the bottom half of the distribution is smaller—when future income from Social Security benefits is not included in the measure of wealth (that is, when wealth is measured as only marketable wealth plus defined benefit wealth). Excluding that income, the share of wealth held by the families in the top 10 percent of the distribution in 2022 was 69 percent instead of 60 percent, and the share held by families in the bottom half of the distribution was 3 percent rather than 6 percent.
The distribution of family wealth would also differ if future Social Security benefits were not paid in full as scheduled under current law. The Social Security program is funded by dedicated tax revenues that are credited to the Old-Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund, which finance the program’s benefits. In CBO’s estimation, without legislative action, the combined balance of those trust funds would be exhausted in fiscal year 2034. If that happened, then benefits would have to be reduced to ensure that the Social Security system’s outlays did not exceed its revenues. Because Social Security wealth accounts for a larger portion of the wealth of families in the bottom half of the distribution, reductions in benefits would have a larger effect, in percentage terms, on the wealth of those families than on the wealth of families in the top half of the distribution. For information about how the distribution of family wealth changes when only those payable Social Security benefits are considered, see Appendix C.
How Did the Distribution of Wealth Change From 1989 to 2022?
From 1989 to 2022, total family wealth almost quadrupled—from $52 trillion in 2022 dollars to $199 trillion—but that increase in wealth did not affect groups equally. The share of total wealth held by families in the top 10 percent of the distribution increased from 56 percent to 60 percent, and the share held by families in the top 1 percent increased from 23 percent to 27 percent. Other families in the top half of the distribution, by contrast, went from holding 37 percent of all wealth to holding 33 percent. The share of wealth held by families in the bottom half of the distribution remained unchanged at 6 percent.
How Did Family Wealth Change During the Coronavirus Pandemic?
From 2019 to 2022, total family wealth increased by 17 percent, from $170 trillion to $199 trillion, and median family wealth increased by 8 percent, from $466,500 to $504,000. Wealth inequality changed little during the coronavirus pandemic: The share of wealth held by families in the top 1 percent of the distribution remained at roughly 27 percent, increasing by less than a percentage point, and the share held by families in the bottom half of the distribution remained at 6 percent. When Social Security is not included in the measure of wealth, the share of wealth held by the top 1 percent instead declined from 34 percent in 2019 to 33 percent in 2022, and the share held by the bottom half of the distribution increased from 2 percent to 3 percent, partly because of increases in that group’s home equity and nonretirement financial assets.
What Factors Might Have Affected the Distribution of Wealth?
The distribution of family wealth at any point in time can be the result of many factors, including differences among families in lifetime income, in propensities to save and rates of return on savings, in investment skills and strategies, and in transfers of wealth from one generation to another—for example, through inheritances and bequests. This report does not attempt to separately identify the relative importance of such factors in explaining the changing distribution of wealth over time.
Research has attributed some of the differences in the wealth of low- and high-income families to differences in intergenerational wealth transfers. Intergenerational wealth transfers can propagate wealth disparities if families with certain characteristics are more likely to pass down wealth to their children. For example, in 2022, 17 percent of families in the bottom third of the distribution of income (adjusted for age and family size) reported having ever received an inheritance, compared with 28 percent of families in the top third of the income distribution. Among the families who received inheritances, those with lower income typically received smaller amounts—$141,000, on average, for families in the bottom third of the income distribution, compared with $490,000 for families in the top third. And fewer families in the bottom third of the income distribution expected to leave a bequest—49 percent, versus 75 percent of families in the top third of the distribution.
In addition, some of the growth in family wealth over time can be attributed to the aging of the population and to rising levels of education among all age groups, among other factors. Older people tend to have more wealth than younger people, and people with more education are generally wealthier than people with less. As a result, in all years covered by this analysis, families in the top half of the wealth distribution tended to be older and more educated than those in the bottom half. For a discussion of what family wealth at selected percentiles of the distribution might have been if the average age, educational attainment, and marriage rates of the population had not changed between 1989 and 2022, see Appendix D.
What Data Were Used for This Analysis?
The analysis in this report is based primarily on data from the Survey of Consumer Finances—a nationally representative survey of U.S. families that is conducted every three years. Different families are interviewed for each edition of the survey, so the survey does not track the same families over time. Moreover, many families experience changes in their wealth over time, and some may move from one segment of the wealth distribution to another. As a result, the families that make up any given segment of the wealth distribution differ from year to year, though many families may remain in the same segment for many years. Therefore, this report should not be interpreted as describing the experiences of particular families; rather, it describes how the overall distribution of family wealth has changed over time.
How Does This Analysis Differ From CBO’s Previous Studies of Family Wealth?
In 2016, CBO published a report that analyzed trends in the distribution of wealth among families from 1989 to 2013, and in 2022, CBO published a report that analyzed those trends through 2019 and changes in total family wealth thereafter. The more recent report also examined how changes in wealth differed among families depending on individual characteristics such as income, educational attainment, race and ethnicity, and age. In the 2016 report, family wealth was defined as a family’s marketable wealth; in the 2022 report, it was defined as the sum of a family’s marketable wealth and its defined benefit wealth.
Not only does this report update those prior analyses with more recent data, it also incorporates the value of future Social Security benefits into the measure of wealth. To estimate wealth in the form of future income from Social Security or defined benefit pension plans, CBO conceptually equated those sources of income to assets held in the present that can produce the same stream of future payments. Although those benefits will provide income in retirement, they differ from other assets in that families cannot use them to fund current consumption, and they do not retain value after the owner’s death. (For details on CBO’s method for estimating Social Security wealth, see Appendix B; for estimates calculated with alternative measures of Social Security wealth, see Appendix C.)
In a complementary analysis, CBO used its updated measure of family wealth to examine the relationships between family wealth and the individual characteristics that it examined in 2022. The results are presented in the supplemental data published with this report at www.cbo.gov/publication/60343#data. On average, Social Security wealth accounted for a larger share of assets among families who had less income, had less education, or were Black or Hispanic. Social Security wealth was more evenly distributed than most other categories of assets. As a result, differences in wealth between families with different characteristics are smaller when Social Security wealth is included in the measure of wealth.
Total Family Wealth
In 2022, total family wealth in the United States—that is, the sum of all families’ assets minus their debt—was $199 trillion. Adjusted for inflation, that amount is four times the amount of family wealth in 1989. Measured as a percentage of the nation’s gross domestic product, family wealth grew from 456 percent to 773 percent from 1989 to 2022, at an average rate of about 4 percent per year.
Over that period, the only significant decline in total family wealth occurred during the 2007–2009 recession. From 2007 to 2010, total family wealth fell by 6 percent; the declines were steepest in the bottom half of the wealth distribution. By 2013, family wealth had mostly recovered in all segments of the distribution, and it continued to grow through 2022.
Between 1989 and 2019, the percentage increase in total wealth held by families in the top 10 percent was slightly larger than the percentage increase in total wealth held by families in the rest of the distribution. After 2019, wealth increased by 16 percent in the top 10 percent of the distribution, by 17 percent in the 51st to 90th percentiles, and by 18 percent in the bottom half of the distribution.
Composition of Family Wealth
To analyze changes in the composition of family wealth, CBO separated wealth into seven mutually exclusive categories—six categories of assets plus nonmortgage debt. The categories of assets are home equity, nonretirement financial assets, wealth from defined benefit pension plans, wealth from defined contribution retirement plans, wealth from Social Security benefits, and other assets, such as vehicles and business equity. (For detailed definitions of all seven categories, see Appendix A.)
Adjusted for inflation, the total value of all six categories of assets increased from 1989 to 2022, but those gains were slightly offset by a rise in nonmortgage debt. Over time, home equity and assets in the “other” category accounted for decreasing shares of total family wealth, while nonretirement financial assets and retirement assets (in the form of defined benefit wealth and defined contribution wealth) made up increasing shares. As a share of total wealth, Social Security wealth changed little from 1989 to 2007, increased sharply from 2010 to 2016 as the interest rates on Treasury securities declined, and fell thereafter. (Low interest rates raise the present value of future streams of income. For details, see Appendix B.)
Although total defined benefit wealth increased throughout the period, defined benefit pension plans became less common, so the share of retirement wealth attributable to defined benefit wealth declined. Defined contribution wealth’s share of retirement wealth increased from less than one-third in 1989 to almost one-half by 2007. It continued to grow modestly thereafter, reaching 58 percent in 2022.
Increases in the Real Value of Components of Wealth, 1989 to 2022
Trends in the Wealth of Families at Selected Percentiles of the Distribution
Over the 1989–2022 period, family wealth increased most rapidly at the 25th percentile of the wealth distribution. (That is the point in the distribution at which 25 percent of families have less wealth and 75 percent have more.) Measured in 2022 dollars, family wealth rose by 232 percent at the 25th percentile, by 131 percent at the 50th percentile, and by 148 percent at both the 75th and the 90th percentiles.
The differential growth of family wealth at those percentiles is partly attributable to differences in growth rates after the 2007–2009 recession. From 2007 to 2010, wealth increased at the 90th percentile but declined at the other percentiles. Between 2010 and 2022, however, wealth grew fastest at the 25th percentile, increasing by 102 percent.
During the coronavirus pandemic—between 2019 and 2022—family wealth increased by 21 percent at the 25th percentile, by 8 percent at the 50th percentile, by 18 percent at the 75th percentile, and by 13 percent at the 90th percentile.
Excluding Social Security wealth, family wealth rose by less between 1989 and 2022 and grew most rapidly at the 90th percentile. By that measure, wealth increased by 116 percent at the 25th percentile of the distribution, by 86 percent at the 50th percentile, by 128 percent at the 75th percentile, and by 137 percent at the 90th percentile.
Wealth Inequality
Family wealth was skewed toward families at the top of the wealth distribution over the entire 33-year period. The share of wealth held by families in the top 10 percent of the distribution increased; gains in the top 1 percent accounted for all of that growth. The share of wealth held by families in the bottom half of the distribution remained roughly unchanged. In 2022, families in the top 10 percent of the distribution held 60 percent of all wealth, and families in the bottom half held 6 percent.
Social Security wealth was more evenly distributed across the population than marketable wealth or defined benefit wealth. As a result, when Social Security wealth is excluded from the measure of wealth, the share of wealth held by families in the top 10 percent of the distribution is even larger—69 percent.
The Top 10 Percent
In 2022, families in the top 10 percent of the wealth distribution—those whose wealth exceeded $2.9 million—held an average of $9.1 million in wealth. After falling during the 2007–2009 recession, the average wealth of the group rose, driven by increases in the value of all categories of assets. From 2019 to 2022, the average value of almost every category of assets held by families in the group increased further; the exception was Social Security wealth, whose value declined because of a spike in interest rates. Over the same period, the group’s nonmortgage debt nearly doubled, but it remained low in relation to the group’s assets.
Assets and Debt of Families in the Top 10 Percent of the Wealth Distribution
The 51st to 90th Percentiles
In 2022, families in the 51st to 90th percentiles of the wealth distribution had $504,000 to $2.9 million in wealth; their average wealth was $1.3 million. From 2007 to 2010, losses in home equity, nonretirement financial assets, and assets in the “other” category drove down average real wealth within the group. The recovery that followed was fueled by increases in Social Security wealth, retirement assets, nonretirement financial assets, and home equity; some of those gains were offset by a rise in nonmortgage debt. From 2019 to 2022, the average value of assets held by families in the group increased most for nonfinancial retirement assets and home equity. Over the same period, the group’s average Social Security wealth declined.
Assets and Debt of Families in the 51st to 90th Percentiles of the Wealth Distribution
The 26th to 50th Percentiles
In 2022, families in the 26th to 50th percentiles of the wealth distribution had $178,600 to $504,000 in wealth; their average wealth was $316,200. Adjusted for inflation, the group’s average wealth declined from 2007 to 2010, erasing some of the gains made since 1989. An important factor driving that decline was an increase in the percentage of homeowners whose mortgage debt exceeded their home’s value and whose home equity was thus negative. The share of families who owned homes also declined in those years and remained lower than its prerecession level through 2022.
After 2010, increases in average home equity among homeowners as well as increases in Social Security wealth and retirement assets contributed to a recovery in the group’s average wealth. Some of those gains were offset by an increase, starting in 2013, in the share of families with nonmortgage debt and the average amount of that debt. From 2019 to 2022, families with home equity, nonretirement financial assets, and other assets saw the value of those assets rise, on average, while the value of their Social Security wealth and retirement assets changed little. The percentage of families with nonmortgage debt increased, but the average amount of debt they held declined.
Assets and Debt of Families in the 26th to 50th Percentiles of the Wealth Distribution
The Bottom 25 Percent
In 2022, families in the bottom 25 percent of the wealth distribution had less than $178,600 in wealth. On average, families in that group had $74,200 in wealth. Eight percent (amounting to 2 percent of the overall population) had negative wealth, meaning that their debt exceeded the sum of their marketable wealth, defined benefit wealth, and Social Security wealth. Twenty-three percent (amounting to 8 percent of the overall population) had negative net worth, meaning that their debt exceeded their marketable wealth.
From 2007 to 2010, average wealth within the group fell, mostly because of a drop in home equity and a rise in nonmortgage debt. In later years, as home equity rebounded and Social Security wealth increased, the families’ average wealth grew by 171 percent—from $27,400 in 2010 to $74,200 in 2022. Until 2019, that growth was tempered by further increases in nonmortgage debt, especially student loan debt. (Families in the bottom quarter of the wealth distribution were more likely to hold student loan debt because they were younger, on average, than families in other wealth groups.)
From 2019 to 2022, families in the group saw increases in the average values of all categories of assets they held; home equity and assets in the “other” category grew fastest. The share of families with nonmortgage debt grew by 5 percentage points, but the amount of nonmortgage debt they held shrank by an average of 23 percent. On average, families’ credit card balances declined by 10 percent, their student loan debt declined by 8 percent, and their other debt declined by 39 percent. Only average vehicle debt increased, by 6 percent.
Assets and Debt of Families in the Bottom 25 Percent of the Wealth Distribution
Composition of Family Wealth, by Wealth Group
From 1989 to 2022, the composition of family wealth shifted toward nonretirement financial assets in the top 10 percent of the wealth distribution, toward Social Security wealth and retirement assets in the 51st to 90th percentiles, and toward Social Security wealth in the bottom half of the distribution. For all wealth groups, the share of total wealth attributable to home equity declined.
Over the same period, defined contribution plans became more common. In 2022, those plans made up more than half of the retirement assets held by all wealth groups except for the one comprising families in the 51st to 90th percentiles, where most of the defined benefit wealth was concentrated.
Debt declined in proportion to assets for families in the bottom 25 percent of the wealth distribution and changed little for other groups. In 1989, vehicle debt made up the largest share—41 percent—of nonmortgage debt held by families in the bottom quarter of the wealth distribution; in 2022, student loan debt made up the largest share of their nonmortgage debt, accounting for 64 percent. By contrast, for families in other wealth groups, most nonmortgage debt was in the form of vehicle loans in both years.
Types of Assets and Debt Measured as a Proportion of Total Assets, by Wealth Group
Percent
Composition of Debt of Families in the Bottom 25 Percent of the Wealth Distribution
Throughout the 1989–2022 period, mortgage debt was the largest component of debt of families in the bottom quarter of the wealth distribution. Before and during the 2007–2009 recession, it continually increased as a share of total debt; in 2010, it reached 63 percent, boosted by the housing market crash and an increase in the number of families with negative home equity and large outstanding mortgages. (In CBO’s main analysis, mortgage debt was subtracted from families’ home values to calculate home equity.)
In later years, student loans accounted for an increasing share of debt, even as the average age of families in the bottom 25 percent of the distribution increased. The proportion of families with student loans grew from 1989 to 1992, when it reached 24 percent. After years with little change, it rose from 2007 to 2016, reaching 40 percent, and then began to fall. Adjusted for inflation, the average balance of families’ student loans nearly doubled, rising from $27,700 in 2007 to a peak of $53,200 in 2019, then declined to $48,900 by 2022. (By comparison, families in the bottom 25 percent with mortgages had an average of $163,600 in mortgage debt in 2007 and $132,000 in 2022.) Because student loan debt is typically accumulated in the process of attaining a higher level of education, which can increase lifetime earnings, such debt might have different implications for wealth accumulation over time than other types of nonmortgage debt.
From 2019 to 2022, the total debt held by families in the group declined by 20 percent. Mortgage debt fell by 28 percent, student loan debt by 16 percent, and credit card debt by 5 percent. Vehicle debt increased by 7 percent.
Composition of Debt of Families in the Bottom 25 Percent of the Wealth Distribution
Percent
Appendix A: Definitions
assets. Consist of home equity, defined benefit wealth, defined contribution wealth, Social Security wealth, nonretirement financial assets, and other assets.
business equity. A component of the category “other assets.” Business equity is measured as the net value of a family’s sole proprietorships, limited partnerships, other types of partnerships, S corporations, other types of corporations that are not publicly traded, limited liability companies, and other types of private businesses, including certain family farms and ranches.
defined benefit wealth. The present value of the expected stream of benefits from defined benefit pension plans associated with current or past jobs. Defined benefit pension plans are employer-sponsored retirement plans that guarantee a certain stream of income in retirement; that income is usually based on workers’ accumulated years of service and their final salary or highest salary over several years. For details on how defined benefit wealth was calculated, see Appendix B.
defined contribution wealth. The sum of the balances reported in the SCF for a family’s defined contribution–type retirement accounts—including Keogh plans, 401(k) plans, and similar tax-deferred retirement accounts from current or past jobs. Defined contribution plans provide participants with a tax-preferred savings account to which both the employee and the employer can contribute; assets in those accounts vary with investment returns. In this analysis, defined contribution wealth also includes balances in individual retirement accounts (tax-advantaged retirement savings accounts that are not employer-sponsored). No adjustments were made to account for potential early withdrawal fees or for future income taxes to be paid when funds are withdrawn.
family. The primary economic unit in a household, as defined by the SCF. A family, in that context, consists of a single person or a couple and all other people in the household who are financially interdependent with that person or couple.
family wealth. A family’s assets minus its debt. Unless otherwise specified, in this report, family wealth is the sum of a family’s marketable wealth, the value of its promised income from defined benefit pension plans, and the value of its accrued Social Security benefits. Family wealth in all years is reported in 2022 dollars. To remove the effects of inflation, CBO adjusted family wealth in years before 2022 by using the price index for personal consumption expenditures from the Bureau of Economic Analysis.
Financial Accounts of the United States (FAUS). A data source maintained by the Board of Governors of the Federal Reserve System that tracks the total assets and liabilities in each sector of the economy. CBO used information from the FAUS about total defined benefit liabilities, which are not directly measurable in the SCF, to estimate defined benefit wealth. (Total defined benefit liabilities are the benefits that defined benefit pension plans owe to participants.)
full retirement age. The age at which workers can first claim full (not reduced) Social Security retirement benefits. Monthly benefit amounts are adjusted for the age at which workers claim benefits; those adjustments are intended to provide a worker with roughly the same present value of total lifetime benefits, based on average life expectancy, regardless of when the benefits are claimed. Claiming benefits before the full retirement age results in a permanent reduction in monthly benefits (to account for the longer expected period of benefit receipt); claiming benefits after that age (up to age 70) results in a permanent increase in monthly benefits (to account for the shorter expected period of benefit receipt).
home equity. The value of a family’s primary residence, if owned, minus the amount owed on any mortgages or home equity loans.
marketable wealth. The difference between a family’s marketable (that is, easily tradable) assets and its debt. Marketable assets consist of home equity, other real estate (net of real estate loans), financial securities, bank deposits, defined contribution wealth, and business equity. Debt is nonmortgage debt, including credit card debt, vehicle loans, and student loans. Marketable assets and debt are measured by the SCF as the balances reported by survey respondents. For defined contribution wealth, CBO made no adjustments to account for potential early withdrawal fees or for future income taxes to be paid when funds are withdrawn. Moreover, no adjustments were made to account for taxes on unrealized capital gains on other assets.
median wealth. The wealth of the family at the midpoint of a distribution. Half of all families have more wealth than the family at the median, and half have less.
net worth. See marketable wealth.
nonmarketable wealth. Sources of future income that would not retain value after their owner’s death. Examples include income from defined benefit pension plans and Social Security benefits.
nonmortgage debt. A family’s total debt, excluding any outstanding mortgages on the family’s primary residence. Nonmortgage debt consists of consumer debt (including credit card debt and vehicle loans), student loan debt, and any other remaining debt.
nonretirement financial assets. Bank deposits, financial securities, the cash value of life insurance, and trust funds.
other assets. Real estate (net of real estate loans) other than a family’s primary residence, vehicles, and business equity.
Old-Age, Survivors, and Disability Insurance (OASDI). Also referred to as Social Security. OASDI is the federal program that provides monthly benefits to qualified retired and disabled workers and their dependents and to survivors of insured workers. Eligibility and benefit amounts are determined by a worker’s lifetime earnings subject to Social Security payroll taxes and by the age at which benefits are claimed. The program has two components—Old-Age and Survivors Insurance and Disability Insurance—and is funded by dedicated tax revenues that are credited to the Old-Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund. Although the trust funds are legally separate, in this analysis, CBO considers them as combined trust funds.
percentile. A value that indicates the percentage of observations in a distribution that fall below it.
present value. A single number that expresses the flow of current and future payments or income in terms of an equivalent lump sum paid or received at a specified time. A present value depends on the discount rate that is used to translate future cash flows into current dollars.
reference person. Defined by the SCF as the male in a mixed-sex couple and the older person in a same-sex couple. A single person is considered a family reference person.
respondent. In the SCF, the respondent is the person identified as the most financially knowledgeable member of the family. In most cases, the respondent is the reference person.
retirement assets. Defined contribution wealth and defined benefit wealth. CBO made no adjustments to account for potential early withdrawal fees or for future income taxes to be paid when funds are withdrawn or income is received. (Retirement assets in this analysis do not include expected Social Security benefits.)
Social Security benefits. Social Security retirement benefits and Social Security disability benefits.
Social Security disability benefits. The monthly benefits provided through the Social Security program to qualified people with a disability that stops or limits their ability to work. If a person is receiving Social Security Disability Insurance benefits when they reach full retirement age, their disability benefits automatically convert to retirement benefits, and the benefit amount remains the same.
Social Security retirement benefits. The monthly benefits provided through the Social Security program to qualified retired people and their spouses.
Social Security wealth. The present value of a family’s expected stream of income from Social Security benefits associated with current or past jobs. For details on how Social Security wealth was calculated, see Appendix B.
student loan debt. A family’s outstanding loans for educational expenses, including those for a child’s education. Student loan debt is one of the components of nonmortgage debt. No adjustments were made to account for the potential loan forgiveness associated with loans repaid through income-driven repayment plans.
Survey of Consumer Finances (SCF). A cross-sectional survey of U.S. families and their finances that is conducted every three years. For details on the SCF, see Appendix B.
wealth. See family wealth.
wealth groups. Segments of the population defined by their position within the overall distribution of wealth. For each year the SCF was conducted, CBO sorted families into wealth groups on the basis of their family wealth, unadjusted for family size. For more details on how wealth groups were constructed, see Appendix B.
Appendix B: Data, Methods, and Analytical Considerations
The Congressional Budget Office relied on data from several sources for its analysis of the distribution of wealth among families in the United States. This appendix describes those data and explains CBO’s methods for estimating Social Security wealth and for assessing the distribution of family wealth over time. It also provides information on how changes in the characteristics of the U.S. population might have affected the trends in wealth over time.
Sources of Data
The analysis in this report is based primarily on data from the Survey of Consumer Finances (SCF) from 1989 to 2022, the first and last years for which consistent data from the SCF are available. The SCF is a triennial, cross-sectional survey of U.S. families and their finances that is sponsored by the Board of Governors of the Federal Reserve System and the Department of the Treasury. Those data were augmented with information about the nation’s 400 wealthiest people as identified by Forbes magazine and information about total defined benefit liabilities from the Financial Accounts of the United States (FAUS). In addition, CBO used data from the Current Population Survey (CPS) to model the earnings of respondents and spouses that were not reported in the SCF.
Survey of Consumer Finances
Every three years, the SCF gathers data on a sample of about 3,000 to 6,000 families in the United States. Those data include information about families’ demographic characteristics, assets and liabilities, earnings, income, and pensions.1 The 1989 SCF was conducted between October 1989 and March 1990. Most subsequent surveys were conducted between May and December of the survey year.
The SCF has three limitations for use in analyses such as this. First, changes in sampling techniques have made it necessary to restrict analyses of SCF results to surveys conducted since 1989.2 Second, like other surveys that rely on self-reported information, the SCF is susceptible to measurement and reporting error.3 And third, because each iteration of the SCF samples a different group of families, the results amount to snapshots of family wealth taken every three years; they do not provide information about changes in the wealth of specific families from one survey to the next. CBO’s estimate that real median wealth rose by 128 percent from 1989 to 2022 should thus be interpreted to mean that the wealth of the family at the median in 2022 was 128 percent greater than the wealth of the family at the median in 1989. Those two families were not the same, so the estimate does not indicate that the wealth of the family at the median in 1989 increased by 128 percent over the next 33 years.
The Forbes 400
Although the SCF covers nearly the full distribution of family wealth, it excludes information about the nation’s 400 wealthiest people, as identified by Forbes magazine.4 CBO supplemented the SCF data with the Forbes data to identify the shares of wealth held by different groups and to calculate the percentiles of the full distribution of family wealth.5 The Forbes data lack information on portfolio allocations, so when calculating changes in categories of assets and debt for families in the top 10 percent of the wealth distribution, CBO approximated the Forbes 400 families’ composition of wealth by using that of other families in the top 0.1 percent of the distribution of marketable wealth.6
Financial Accounts of the United States
The FAUS are national accounts that measure total wealth by economic sector. The data are released on a quarterly basis by the Federal Reserve Board. Each release shows the assets and liabilities in each sector of the economy at the end of the period in question. CBO supplemented the data on family wealth from the SCF with information about total defined benefit wealth from the FAUS. That information was drawn from Table L.117, “Private and Public Pension Funds,” which includes the total defined benefit liabilities of private, federal, and state and local funds.7
Current Population Survey
The CPS is a household survey that gathers information on people’s employment, income, and demographic characteristics. CBO used data from the Annual Social and Economic Supplement of the CPS for 1976 to 2019 to model people’s earnings over time.8 In particular, CBO relied on the observed relationship in the CPS between earnings and individual characteristics (such as age, sex, education, marital status, and race and ethnicity) to model earnings over the lifetime of each respondent and spouse in the SCF. Each Annual Social and Economic Supplement of the CPS samples different people. CBO did not use CPS data for the years after 2019 because that period was characterized by significant labor-supply disruptions caused by the coronavirus pandemic that were not indicative of long-term trends.
Alternative Sources of Data
In general, researchers look to three main sources of data for analyses of family wealth: the SCF, federal estate tax returns, and federal income tax returns.9 None of those sources provides a complete picture of the wealth of families across the nation’s entire wealth distribution. For example, the SCF data are collected only every three years.
CBO did not use data on estate taxes for this analysis because only very wealthy families—those in the top 1 percent or 2 percent of the wealth distribution—are required to file them. Because the data do not cover the whole population, estimating wealth from estate tax records involves drawing inferences from the limited population that is subject to the tax: Only the estates of deceased people with wealth exceeding a certain threshold are required to file an estate tax return. In 2024, the threshold for federal estate taxes is $13.61 million for individuals and $27.22 million for married couples.
Similarly, CBO did not use income tax data for this analysis because that method poses several challenges. Using income tax data requires analysts to estimate total wealth on the basis of annual income, an exercise that involves imputing wealth arising from the categories of assets that do not generate taxable income and making assumptions about rates of return on capital to infer the value of those assets.10
Unit of Analysis
The unit of analysis in this report is the family. The SCF defines the family as the primary economic unit in a household. A family thus consists of a single person or a couple and all other people in the household who are financially interdependent with that person or couple.
Definitions of Wealth
In the analysis presented here, family wealth comprises marketable wealth and future income from defined benefit pensions and Social Security benefits. Marketable wealth consists of assets that can be bought and sold or inherited, minus debt. The other two components of family wealth are forms of nonmarketable wealth. Measures of family wealth that include nonmarketable wealth show less concentration at the top of the distribution than those that do not.
Marketable Wealth
CBO defined a family’s marketable wealth as the difference between its marketable assets and its nonmortgage debt. Marketable assets consist of all financial assets—bank deposits, financial securities, the cash value of life insurance policies, trust funds, defined contribution retirement accounts (including individual retirement accounts, Keogh plans, and 401(k)-type plans from current or past jobs), home equity (the value of families’ primary residence minus any outstanding mortgage debt) and other real estate (net of real estate loans), vehicles, and business equity. Wealth from defined contribution plans was measured as the account balances reported by SCF respondents; CBO made no adjustments for potential early withdrawal fees or for future income taxes to be paid when funds are withdrawn. Nonmortgage debt consists of consumer debt (such as credit card debt and vehicle loans) and other debt (including student loans, which were not adjusted to account for potential loan forgiveness).
Marketable wealth is based on categories of assets and debt for which information is readily available in the SCF data, so calculating that measure from those data is straightforward.11
Nonmarketable Wealth
CBO’s measures of nonmarketable wealth are constructed in a way that makes them comparable to its measure of marketable wealth, which is based on observed prices in actual markets. Because there are no observable prices for nonmarketable assets, the measures of nonmarketable wealth instead represent the hypothetical values those assets would have if they were marketable. For example, the measure of a family’s Social Security wealth is the amount the family could receive if they were able to sell the rights to their Social Security benefits in a competitive market. Similarly, the measure of a family’s defined benefit wealth is the amount the family could receive if they were able to sell the rights to their future income from defined benefit pension plans. Other types of resources available for consumption in retirement, including assets in defined contribution plans, are measured using SCF respondents’ account balances, which reflect the current value of the underlying financial assets.
No analogous measure exists in the SCF for Social Security wealth or defined benefit wealth, so wealth from those future streams of income is approximated by their present value, which is calculated using a discount rate to translate future cash flows into current dollars.12 Because the same discount rate is used in the calculation for all families, CBO’s estimates do not necessarily reflect the value that a specific family would place on their expected future stream of income. Hypothetically, a family without liquid assets might be willing to accept less money in exchange for its future retirement income (either through Social Security or defined benefit pensions) than is reflected in the estimate that CBO has generated for this report. In other words, that family might discount its future income at a high rate—which would make the present value of its future income lower than what CBO has estimated. Indeed, research has documented that many participants in defined benefit pension plans opt to receive their benefits in a lump-sum payment rather than an annuity even when the implicit discount rate used for transforming the annuity into a cash payout is high.13
Defined Benefit Wealth
CBO measured defined benefit wealth as the present value of future defined benefit payments that an SCF respondent and spouse expect to receive. Those payments include pensions that the family is currently receiving or has earned the right to receive in the future through current or past employment. Defined benefit wealth is not directly measured in the SCF, so CBO adapted an approach for projecting future defined benefit income for each family in the survey and estimating the value of those benefits in each year of the survey.14 The projected value of the benefits was also adjusted to account for the risk that beneficiaries might not receive their full promised benefits.
CBO relied on information from the SCF to capture the distribution of defined benefit wealth and data from the FAUS to capture the total defined benefit wealth in the economy. Estimates of defined benefit wealth based on families’ information in the SCF were scaled up to match the appropriate total values in the FAUS. CBO’s method for projecting defined benefit income is described in detail in a working paper that the agency published in 2023.15
Social Security Wealth
Like defined benefit wealth, Social Security wealth was measured as the benefits an SCF respondent and spouse received in the current year and the present value of future benefits that they had earned the rights to receive through current or past employment, including spousal and survivor benefits. Future benefits in that measure are scheduled benefits. That measure reflects the assumption that the Social Security Administration will pay benefits as scheduled under current law regardless of the status of the program’s trust funds; CBO projects that the combined balances in those trust funds will be exhausted in fiscal year 2034.16 Appendix C describes how estimates of wealth would change if the measure of Social Security wealth included payable benefits instead. Payable benefits are limited to the amounts payable from dedicated funding. That is, payable benefits are reduced as necessary to ensure that Social Security’s outlays do not exceed the system’s revenues once the combined balance of the trust funds is exhausted.
Like defined benefit wealth, Social Security wealth is not directly measured in the SCF. CBO adapted an approach for projecting future benefits from Social Security for each family in the SCF and estimating the present value of those benefits in each year of the survey.17 In calculating those present values, CBO used discount rates adjusted for market risk (as explained below) in order to estimate a value of Social Security wealth that is consistent with the estimates of other assets in families’ portfolios. CBO’s method for projecting Social Security benefits and estimating their present value is summarized below; a working paper describing it in more detail will be published after this report.
Other Nonmarketable Wealth
In this report, a family’s wealth is its marketable wealth plus the present value of the future income from defined benefit pensions and Social Security that it has earned to date. Family wealth, as measured in this report, does not reflect all of the resources available for consumption over that family’s lifetime, such as expected future income stemming from government transfer programs other than Social Security or from human capital in the form of future earnings. No observable market prices exist for such sources of future income, and they are not typically included in broad measures of family wealth.
Uncertainty in CBO’s Measures of Wealth
CBO’s measures of marketable and nonmarketable wealth do not account for the fact that families might value assets differently when those assets are not easily converted into cash without loss or penalty, or when converting them into cash has tax consequences. For example, early withdrawals from defined contribution plans are often either restricted or subject to fees. In addition, balances in defined contribution plans financed with Roth contributions would be valued more highly than identical balances financed with traditional contributions. The reason is that the balance in a Roth account will generate a larger stream of income in retirement because money from it can be withdrawn tax-free once the account holder reaches 59 and a half years of age. (Roth defined contribution plans are funded with after-tax money that is withdrawn tax-free in retirement. By contrast, traditional defined contribution plans are financed with pretax money that is taxed at the time of withdrawal.)
Other assets can also differ in the tax treatment of the income they generate. For example, the taxes that a family owes on its realized capital gains (generated from the profitable sale of stocks, bonds, real estate, and other assets) can depend on a range of factors, including the length and type of the investment—certain types of investment have preferential tax treatments. Social Security income is also treated preferentially, in that a portion of the benefits is exempt from income taxes in retirement. In this report, CBO made no adjustments to its measures of assets or debt to account for the potential tax implications of converting family wealth into cash.
Estimates of Families’ Social Security Wealth
Because Social Security wealth is not directly measured in the SCF, CBO relied on statistical relationships estimated with CPS data, in addition to information from the SCF, to project future Social Security benefits and estimate total Social Security wealth.
CBO’s Measure of Social Security Wealth
CBO measured Social Security wealth as the value of a family’s accrued, or earned-to-date, Social Security retirement and disability benefits (including spousal and survivor benefits), as scheduled under current law. (For simplicity, throughout the report, those benefits are collectively referred to as Social Security benefits, and their present value as Social Security wealth.) That measure includes benefits that the family receives in the current year and benefits that the family has earned the rights to receive in the future through current or past employment. It does not include benefits that the family is projected to earn through future employment. An alternative measure of Social Security wealth, often referred to as the continuation value, reflects the Social Security wealth that workers would have in retirement if they continued to accrue benefits in future years. (For more information about that measure of Social Security wealth, see Appendix C.)
Although the SCF does not directly measure Social Security wealth, it collects detailed information about respondents’ and their spouses’ Social Security retirement and disability benefits at the time of the interview, their current and past employment, and their expectations about future employment. To estimate Social Security wealth for each family in the SCF that was already receiving Social Security benefits, CBO calculated the present value of the family’s future streams of Social Security benefits plus the value of the benefits received in the year of the survey. For families in which one or both spouses were not receiving benefits, CBO first projected each person’s benefit eligibility, what their benefits would be, and when benefits would commence and then calculated the present value of those future benefits.18
For both types of families, CBO’s method accounts for Social Security benefits to be paid to the living and surviving spouses of beneficiaries in accordance with the Social Security program’s rules. To calculate the present value of Social Security benefits, CBO used additional inputs, including historical and projected interest rates, historical and projected rates of inflation, each individual’s expected longevity, each individual’s probability of becoming disabled and receiving disability benefits, and discount rates adjusted for market risk.19
Projections of Future Benefits and Accrued Social Security Wealth
For families who had not yet started receiving Social Security benefits, CBO approximated the accrued value of their Social Security benefits in the following way:
- First, CBO projected a family’s earnings until retirement and the resulting Social Security benefits. Retirement was assumed to commence at age 70—the age at which a worker’s monthly Social Security benefit stops increasing even if they continue to delay claiming benefits—unless respondents reported that they expected to stop working at an earlier age. In such cases, benefits were projected to commence at that earlier age. Eligibility for benefits was determined on the basis of the respondents’ projected completed careers.
- CBO then estimated the present value, at the time of the SCF, of the family’s future stream of Social Security benefits that would result from a full career (considered to equal 40 years)—that is, the continuation value of Social Security wealth. Each respondent’s work history included past and expected future years with no earnings, as reported in the survey.
- Finally, for each person in the data, CBO used that continuation value of Social Security wealth to estimate the accrued value of Social Security wealth at the time of the survey. Accrued wealth was calculated as the fraction of the continuation value equal to the share of that person’s full career already completed by the time of the survey.
To estimate earnings in all working years (past and future) for each respondent and spouse in the SCF, CBO developed a method that uses all the available information from the SCF on respondents’ current and past employment, expected future employment, and expected retirement. Any remaining gaps in respondents’ and spouses’ lifetime earnings were filled in with imputed values based on data from the Annual Social and Economic Supplement of the CPS.
CBO modeled each person’s annual earnings as a function of characteristics that were observable in both the SCF and the CPS: sex, age, marital status, educational attainment, race and ethnicity, occupation, and year of birth. CPS data for 1976 to 2019 were used to estimate a regression model, and the resulting coefficients were used to project earnings in years not observed in the SCF. CBO used the projected earnings to estimate what type of benefits each person would be eligible for in retirement, as well as to calculate each person’s retirement and disability benefit amounts in accordance with the Social Security program’s rules. Information on marital status and a spouse’s earnings and benefit receipt (current or projected) was used to project potential spousal and survivor benefits.
Discount Factors and the Present Value of Future Benefits
In its estimation of Social Security wealth, CBO made adjustments to account for market risk—the risk that recipients face because their future Social Security payments depend on the state of the economy at the time of their retirement. Market risk is the component of financial risk that remains even after investors have diversified their portfolios as much as possible; it arises from shifts in macroeconomic conditions, such as productivity and employment, and from changes in expectations about future macroeconomic conditions. Social Security beneficiaries face market risk before they start receiving benefits because their benefits depend not only on their earnings in each year of their career but also on the growth of average wages in the economy.20
To account for market risk, CBO reduced the value of projected Social Security payments by using a discount rate that is higher than the interest rates on Treasury securities. That approach is similar to an approach the agency has used to measure the costs of federal credit programs.21 The higher discount rate includes a risk premium that the agency estimated to reflect the market risk borne by future Social Security beneficiaries, but it does not account for the risk of reductions in benefit amounts if the combined balance of the Old-Age, Survivors, and Disability Insurance trust funds is exhausted. (CBO also applied that market risk adjustment to an alternative measure of Social Security wealth based on payable benefits. For details, see Appendix C.)
To calculate the risk premium, CBO relied heavily on methods from academic studies that it has previously used to estimate the value of future payments based on average future wages.22 Those studies measured the risk associated with uncertain future wages by relating uncertainty in wages to uncertainty in the stock market.23 Although they can diverge in the short term, wages and stock prices tend to follow similar paths over longer periods. Stocks earn an excess return—known as the equity premium—over safer assets such as Treasury bonds. Because the prices of stocks are more sensitive to changes in the economy, that excess return compensates investors for taking on more risk.
CBO based both components of the discount rate—Treasury rates and the additional premium for market risk—on data at the time of each SCF survey. For example, to estimate Social Security wealth in 1989, CBO used as discount rates the sum of the rates on Treasury securities in that year plus a risk premium estimated as a share of the equity premium in that year.24
1. For more information about the SCF, see Board of Governors of the Federal Reserve System, “Survey of Consumer Finances” (March 16, 2017), www.federalreserve.gov/econres/aboutscf.htm. Estimates in this report may differ slightly from estimates published in the Federal Reserve Board’s Bulletin, which also uses SCF data, because this report is based on the public version of the SCF, which differs slightly from the version used by Federal Reserve researchers.
2. The SCF was conducted in 1983 and 1986, but it differed methodologically from later surveys. For more information, see Arthur B. Kennickell and R. Louise Woodburn, “Consistent Weight Design for the 1989, 1992, and 1995 SCFs, and the Distribution of Wealth,” Review of Income and Wealth, vol. 45, no. 2 (June 1999), pp. 193–215, https://doi.org/10.1111/j.1475-4991.1999.tb00328.x. According to those authors, sufficient information no longer exists to construct sampling weights that would allow for a consistent comparison of the data going back to 1983.
3. Previous studies have shown that the SCF totals line up closely with estimates of overall household wealth from the FAUS. See, for example, Michael Batty and others, “Updating the Distributional Financial Accounts,” FEDS Notes (Board of Governors of the Federal Reserve System, November 9, 2020), https://doi.org/10.17016/2380-7172.2810. The authors of that study noted that most of the differences are concentrated in private business valuations; the SCF uses market values, whereas the FAUS use a mix of book and market values.
4. For the latest list of the Forbes 400, see Rob LaFranco and Chase Peterson-Withorn, eds., “The Forbes 400: The Definitive Ranking of the Wealthiest Americans in 2023,” Forbes (October 3, 2023), www.forbes.com/forbes-400.
5. When calculating percentiles of the wealth distribution and shares of wealth, CBO considered the people on the Forbes 400 list to be at the top of the distribution. For a study that used a similar approach, see Jesse Bricker, Peter Hansen, and Alice Henriques Volz, “Wealth Concentration in the U.S. After Augmenting the Upper Tail of the Survey of Consumer Finances,” Economic Letters, vol. 184 (November 2019), https://doi.org/10.1016/j.econlet.2019.108659.
6. A similar method is used to impute the portfolio allocation of the Forbes 400 for the Distributional Financial Accounts data. See Board of Governors of the Federal Reserve System, “Distributional Financial Accounts” (September 20, 2024), https://go.usa.gov/xevQb. Some researchers have further adjusted the allocation of public and private equity in the portfolios of the Forbes 400 by using public information about which of those individuals derive most of their wealth from public companies and which derive most of their wealth from private companies. See, for example, Matthew Smith, Owen M. Zidar, and Eric Zwick, Top Wealth in America: New Estimates and Implications for Taxing the Rich, Working Paper 29374 (National Bureau of Economic Research, October 2021), www.nber.org/papers/w29374.
7. The estimates of total defined benefit liabilities and the unfunded share of such liabilities were taken from the FAUS data released on September 8, 2023—the most recent data available at the time this report was written. See Board of Governors of the Federal Reserve System, “Financial Accounts of the United States—Z.1” (September 12, 2024), www.federalreserve.gov/releases/z1/current.
8. For information on the Annual Social and Economic Supplement of the CPS, see Census Bureau, “Annual Social and Economic Supplements” (September 4, 2024), https://tinyurl.com/ysm2xej7.
9. Many nationally representative U.S. household surveys, including the Panel Study of Income Dynamics and the Survey of Income and Program Participation, collect detailed information about households’ assets and debt. The SCF differs from those surveys in that it oversamples high-net-worth taxpayers, who make up a small segment of the population. That approach allows researchers to measure the concentration of wealth at the top of the distribution more precisely. As a result, estimates of total family wealth in the SCF are generally higher than estimates of total wealth in other household surveys, and they more closely align with the measures of total wealth derived from other aggregate data sources such as the FAUS.
10. For an analysis that used that method, see Emmanuel Saez and Gabriel Zucman, “Wealth Inequality in the United States Since 1913: Evidence From Capitalized Income Tax Data,” Quarterly Journal of Economics, vol. 131, no. 2 (May 2016), pp. 519–578, https://doi.org/10.1093/qje/qjw004.
11. For a discussion of categories of wealth that are not included in the SCF, such as human capital and income streams from annuities or trusts, see Arthur B. Kennickell, Ponds and Streams: Wealth and Income in the U.S., 1989 to 2007, Finance and Economics Discussion Series Paper 2009-13 (Board of Governors of the Federal Reserve System, January 7, 2009), https://tinyurl.com/2pae9wzp.
12. A present value is a single number that expresses the flow of current and future payments or income in terms of an equivalent lump sum paid or received at a specified time.
13. See, for example, Monika Butler and Federica Teppa, “The Choice Between an Annuity and a Lump Sum: Results From Swiss Pension Funds,” Journal of Public Economics, vol. 91, no. 10 (November 2007), pp. 1944–1966, https://doi.org/10.1016/j.jpubeco.2007.09.003.
14. The method that CBO used is adapted from the method that the Federal Reserve Board uses to impute defined benefit wealth. See, for example, Michael M. Batty and others, Introducing the Distributional Financial Accounts of the United States, Finance and Economics Discussion Series Paper 2019-017 (Board of Governors of the Federal Reserve System, March 2019), https://doi.org/10.17016/FEDS.2019.017; and John Sabelhaus and Alice Henriques Volz, “Are Disappearing Employer Pensions Contributing to Rising Wealth Inequality?” FEDS Notes (Board of Governors of the Federal Reserve System, February 1, 2019), https://go.usa.gov/xewEb.
15. Nadia Karamcheva and Victoria Perez-Zetune, Defined Benefit and Defined Contribution Plans and the Distribution of Family Wealth, Working Paper 2023-02 (Congressional Budget Office, February 2023), www.cbo.gov/publication/58305.
16. The Deficit Control Act requires CBO to project spending for certain programs, including Social Security, under the assumption that they will be fully funded—and thus able to make all scheduled payments—even if the trust funds associated with those programs do not have enough resources to make full payments. See sec. 257(b)(1) of the Balanced Budget and Emergency Deficit Control Act of 1985, Public Law 99-177 (codified at 2 U.S.C. §907(b)(1) (2016)).
17. See Lindsay Jacobs and others, “Wealth Concentration in the USA Using an Expanded Measure of Net Worth,” Oxford Economic Papers, vol. 74, no. 3 (July 2022), pp. 623–642 (July 2022), https://doi.org/10.1093/oep/gpab054.
18. The aggregate rates of disability benefit receipt were aligned with those underlying CBO’s projections for Social Security. See Congressional Budget Office, CBO’s 2024 Long-Term Projections for Social Security (August 2024), www.cbo.gov/publication/60392.
19. CBO used historical and projected rates of inflation as measured by the price index for personal consumption expenditures and interest rates derived from the yields on Treasury securities. Those projections were based on the economic forecast described in Congressional Budget Office, The 2023 Long-Term Budget Outlook (June 2023), www.cbo.gov/publication/59014. Expected longevity was based on aggregate mortality rates underlying Congressional Budget Office, The 2020 Long-Term Budget Outlook (September 2020), www.cbo.gov/publication/56598. Those rates were adjusted to account for individuals’ sex, birth cohort, educational attainment, earnings, and race and ethnicity, using the approach described in Julian P. Cristia, The Empirical Relationship Between Lifetime Earnings and Mortality, Working Paper 2007-11 (Congressional Budget Office, August 2007), www.cbo.gov/publication/19096.
20. The Social Security Administration calculates the benefit paid to a retired worker who claims benefits at the full retirement age or to a disabled worker using its benefit formula. That formula is applied to a worker’s average indexed monthly earnings—a measure of their average taxable monthly earnings over their 35 highest-earning years, adjusted for changes in average economywide wages that occurred from those years to two years before the worker became entitled to benefits.
21. See, for example, Congressional Budget Office, Measuring the Cost of Government Activities That Involve Financial Risk (March 2021), www.cbo.gov/publication/57052, and Income-Driven Repayment Plans for Student Loans: Budgetary Costs and Policy Options (February 2020), www.cbo.gov/publication/55968.
22. See Elizabeth Ash and others, Exploring the Effects of Medicaid During Childhood on the Economy and the Budget, Working Paper 2023-07 (Congressional Budget Office, November 2023), www.cbo.gov/publication/59231.
23. See, for example, Mark Huggett and Greg Kaplan, “How Large Is the Stock Component of Human Capital?” Review of Economic Dynamics, vol. 22 (October 2016), pp. 21–51, https://doi.org/10.1016/j.red.2016.06.002; and John Geanokoplos and Stephen P. Zeldes, “Market Valuation of Accrued Social Security Benefits,” in Deborah Lucas, ed., Measuring and Managing Federal Financial Risk (University of Chicago Press, 2010), pp. 213–233, https://papers.nber.org/books/luca07-1.
24. To calculate the rates on Treasury securities, CBO followed the “basket of zeros” approach used for credit programs. That approach uses zero-coupon Treasury securities that match the maturity of the cash flows of each credit program. The yield on a Treasury security maturing in one year would be used to discount cash flows one year from disbursement, a two-year rate would be used for cash flows two years from disbursement, and so on. A zero-coupon security is one whose face value is repaid when the security matures. It is typically sold for less than its face value but earns no interest.
Appendix C: Alternative Measures of Social Security Wealth
This appendix describes how the use of different discount rates, definitions of Social Security wealth, and assumptions about future benefit amounts affects estimates of Social Security wealth and total family wealth.
Discount Rates
To estimate families’ Social Security wealth, the Congressional Budget Office discounted the future value of their Social Security benefits using the interest rates on Treasury securities, adjusted for market risk. (For details, see Appendix B.) Here, CBO considers two alternative approaches: one using the unadjusted, or “risk-free,” interest rate on Treasury securities when each edition of the Survey of Consumer Finances (SCF) was published and the other using a constant real (inflation-adjusted) discount rate of 2.8 percent.1
When the present value of Social Security benefits is estimated using the interest rates on Treasury securities—with or without adjustments for market risk—growth in Social Security wealth is faster between 1989 and 2022 than when Social Security wealth is estimated with a constant real discount rate (see Figure C-1). The reason for that difference is the downward trend in the rates on Treasury securities between 1989 and 2022, which boosts the value of future benefits.
When discounted using either risk-free or risk-adjusted Treasury rates, Social Security wealth peaked in 2016, partly because the rates on Treasury securities bottomed out in that year. However, over the same period that Treasury rates followed a downward trend, the estimated premium for market risk followed an upward trend. As a result, the adjusted discount rate used in CBO’s analysis did not fall as sharply as the Treasury rate, so CBO’s estimate of Social Security wealth grows at a slightly slower pace than it would if it were produced using Treasury rates with no adjustment for market risk.
Definitions of Social Security Wealth
In this report, CBO measured Social Security wealth at its accrued value—that is, the present value of future benefits that a family had earned at the time of the SCF survey. For families who were already receiving Social Security benefits, that measure equals the present value of their future stream of Social Security income until the end of life, including the benefits received in the year of the survey. For families who had not started receiving benefits, it reflects the future Social Security benefits they had earned up to that year. Because that measure of wealth reflects the benefits that families had already earned, it is consistent with CBO’s measures of other assets in families’ portfolios. It therefore allows for more accuracy than any alternative measures in analyses of the relative importance of Social Security wealth in the overall distribution of wealth and in the portfolios of families in various parts of the distribution at a given time.
An alternative measure of Social Security wealth, known as the continuation value, captures how much a family’s future Social Security benefits would be worth if both spouses completed their full careers. For families who were already receiving Social Security benefits at the time of the SCF survey, the accrued and continuation values are identical.
The continuation value more accurately illustrates the resources from Social Security that are projected to be available to families in retirement. That makes it useful for assessing how resources in retirement have changed for retirees in different birth cohorts. However, the measure rests on the assumption that families will continue to work (and accrue benefits) until they reach full retirement age. For that reason, the continuation value of Social Security wealth is not directly comparable to other assets in families’ portfolios, since those assets are measured at their market value at the time of the SCF survey rather than at their projected value at some future date.
A third measure of Social Security wealth, known as net Social Security wealth, reflects the present value of future Social Security benefits net of future payroll taxes. That measure is calculated as the continuation value of Social Security wealth (that is, the value of expected future benefits after a full career) minus the present value of payroll taxes that the survey respondent and spouse would have to pay from the time of the SCF survey until retirement. Both the employee and employer portions of the payroll tax are included in the calculation.
The net measure is conceptually closer to the accrued measure than to the continuation measure because it accounts for the fact that families have not yet earned the full value of their projected benefits at the end of their full careers. Specifically, the net measure accounts for the fact that families still need to make future contributions, in the form of payroll taxes, until retirement. However, CBO used the accrued measure in this report because the net measure is more dependent on uncertain future outcomes and is more sensitive to the choice of discount rate.
Regardless of which of the three measures was analyzed, total Social Security wealth increased over the 1989–2022 period (see Figure C-2). Because the accrued value of Social Security wealth is a fraction of the continuation value, the two measures grew at a similar rate over time, and the ratio between the two changed little—the accrued value accounted for 74 percent to 83 percent of the continuation value over that period. Of the three measures, net Social Security wealth increased at the fastest rate. In the calculation of net Social Security wealth, the present value of future taxes that occur sooner in time is subtracted from the present value of future benefits that occur later in time; therefore, the measure is more sensitive to the differences between short- and long-term interest rates at the time of valuation.
Future Payment Scenarios
In CBO’s most recent projections for Social Security, the combined balance of the Old-Age, Survivors, and Disability Insurance trust funds is exhausted in fiscal year 2034.2 If the program’s outlays were limited to what was payable from annual revenues after that point, then Social Security benefits would be about 23 percent smaller than scheduled benefits in 2035; the gap between scheduled and payable benefits generally would increase to about 28 percent by 2098. (CBO assumed that the benefits paid to all existing and new beneficiaries would be reduced by those percentages if the balance of the trust funds was exhausted.)
In that payable-benefits scenario, total family wealth in 2022 would be $5.3 trillion less, or 3 percent lower, than it would be otherwise. That overall reduction in wealth would not be evenly spread among families across the distribution of wealth. (In this analysis, wealth percentiles are defined by family wealth that excludes Social Security wealth.) In the payable-benefits scenario, the wealth held by families in the top half of the distribution would be $3.8 trillion less, and that held by families in the bottom half of the distribution would be $1.6 trillion less (see Figure C-3). The declines would be larger in dollar terms for families in the top half of the distribution because those families tend to have higher lifetime earnings, which translate into larger Social Security benefits.3 The reductions in those larger benefits would result in larger losses in wealth.
However, because Social Security wealth accounts for a larger portion of the wealth held by families in the bottom half of the distribution, reductions in Social Security benefits as a result of the trust funds’ exhaustion would have a larger effect on those families’ wealth in percentage terms. The value of their wealth in 2022 would be 10 percent lower. By contrast, the wealth held by families in the 51st to 90th percentiles would be 4 percent lower; that held by families in the 91st to 99th percentiles would be 2 percent lower; and that held by families in the top 1 percent would be only 0.2 percent lower. Families closer to the bottom of the wealth distribution would also see larger percentage decreases in wealth in a payable-benefits scenario because they are younger, on average, which means that their benefits would be reduced for more years.
The larger losses, in percentage terms, at the bottom of the distribution would increase wealth inequality in the payable-benefits scenario relative to the scheduled-benefits scenario (see Figure C-4). In 2022, the share of wealth held by families in the top 1 percent would be 0.7 percentage points higher, that held by families in the top 10 percent would be 1.0 percentage point higher, and that held by families in the bottom half of the distribution would be 0.4 percentage points lower.
Similar results emerge when the change in net Social Security wealth under a payable-benefits scenario is considered (see Figure C-5). In 2022, the share of wealth held by families in the top 10 percent of the distribution would be 1.8 percentage points higher under the payable-benefits scenario than under the scheduled-benefits scenario, and the share held by the top 1 percent would be 1.1 percentage points higher.
1. For a study that used the first approach, see Sylvain Catherine, Max Miller, and Natasha Sarin, Social Security and Trends in Wealth Inequality (SSRN, August 25, 2024), https://dx.doi.org/10.2139/ssrn.3546668. For a study that used the second approach, see John Sabelhaus and Alice Henriques Volz, Social Security Wealth, Inequality, and Lifecycle Saving, Working Paper 27110 (National Bureau of Economic Research, May 2020), www.nber.org/papers/w27110.
2. Congressional Budget Office, CBO’s 2024 Long-Term Projections for Social Security (August 2024), www.cbo.gov/publication/60392.
3. The Social Security benefit formula is progressive in that it calculates benefit amounts at full retirement age differently depending on beneficiaries’ average indexed monthly earnings (AIME). The AIME is separated into three brackets using two threshold amounts; in 2024, those amounts are $1,174 and $7,078. A beneficiary’s primary insurance amount consists of 90 percent of the portion of their AIME in the lowest bracket plus 32 percent of the portion in the middle bracket plus 15 percent of the portion in the highest bracket. As a result, Social Security benefits are larger as a share of lifetime earnings for someone with a lower AIME. However, on average, higher lifetime earnings result in larger benefits in dollar terms.
Appendix D: Effects of Demographic Changes on Wealth
Shifts in the characteristics of the population can affect the growth and concentration of wealth. Some changes in family wealth from 1989 to 2022 can be attributed to the aging of the population, to rising educational attainment among all age groups, and to a decline in marriage rates: Older people tend to have more wealth than younger people, people with more education are generally wealthier than people with less, and couples tend to have more wealth than single people.
To assess the effects of those factors, the Congressional Budget Office adjusted the distribution of age, educational attainment, and marital status in the U.S. population to estimate what family wealth at selected percentiles of the distribution might have been if such changes had not occurred. CBO’s analysis highlights the relative importance of those characteristics, but it does not account for other factors that might have affected families’ wealth during the period. The analysis also does not account for interactions between the effects of different factors. The combined effects of multiple factors might differ from the sum of their individual effects.
Age
The average age of families’ reference person (a single adult, the male in a mixed-sex couple, or the older person in a same-sex couple) in the Survey of Consumer Finances (SCF) increased from 47.9 years in 1989 to 52.4 years in 2022. To calculate how much the rising average age of the population contributed to the change in family wealth over that period, CBO applied a reweighting technique developed by John DiNardo and colleagues.1 CBO used that approach to calculate counterfactual, or hypothetical, outcomes for selected percentiles of the wealth distribution under a scenario in which the age distribution of the population in 2022 was the same as the age distribution in 1989.2
In CBO’s estimation, had the average age of the population remained unchanged, family wealth in 2022 would have been 26 percent lower at the 25th percentile of the wealth distribution, 24 percent lower at the median, 19 percent lower at the 75th percentile, and 12 percent lower at the 90th percentile.
Education
The percentage of families whose reference person in the SCF had at least a bachelor’s degree rose from 23 percent in 1989 to 40 percent in 2022. CBO applied the same reweighting method to calculate the degree to which an increase in educational attainment contributed to the change in family wealth over that period. Had the educational attainment of the population not changed, family wealth in 2022 would have been 17 percent lower at the 25th percentile, 24 percent lower at the median, 29 percent lower at the 75th percentile, and 25 percent lower at the 90th percentile.
Marital Status
Couples tend to have more wealth than single people, so differences in marriage rates among families in different segments of the wealth distribution may affect estimates of wealth concentration. When family wealth is adjusted to account for marital status by splitting the wealth of couples equally, the share of wealth held by individuals in the top 10 percent of the wealth distribution is smaller than when wealth is measured on a family basis—57.6 percent in 2022, whereas the share held by families in the top 10 percent was 60.1 percent. But the increase in the share of wealth held by those individuals from 1989 to 2022—3.5 percentage points, from 54.0 percent to 57.6 percent—is roughly the same as the increase for families.
1. See John DiNardo, Nicole M. Fortin, and Thomas Lemieux, “Labor Market Institutions and the Distribution of Wages, 1973–1992: A Semiparametric Approach,” Econometrica, vol. 64, no. 5 (September 1996), pp. 1001–1044, https://dx.doi.org/10.2307/2171954.
2. Because CBO did not have information about the age and education of families on the Forbes 400 list, those families were excluded from the calculation of counterfactual outcomes.
About This Document
This report was prepared at the request of the Chairman of the Senate Budget Committee. In keeping with the Congressional Budget Office’s mandate to provide objective, impartial analysis, the report makes no recommendations.
Nadia Karamcheva prepared the report with guidance from Xiaotong Niu and Julie Topoleski. Elizabeth Ash (formerly of CBO) contributed to the empirical analysis. Xinzhe Cheng, Michael Falkenheim, Joseph Kile, John McClelland, and Noah Meyerson offered comments. Daniel Page fact-checked the report.
Max Miller of Harvard Business School and Alice Henriques Volz of the Federal Reserve Board of Governors commented on an earlier draft. The assistance of external reviewers implies no responsibility for the final product; that responsibility rests solely with CBO.
Mark Doms, Jeffrey Kling, and Robert Sunshine (formerly of CBO) reviewed the report. Christine Browne edited it, Casey Labrack created the graphics, and R. L. Rebach prepared the text for publication. The report is available at www.cbo.gov/publication/60343.
CBO seeks feedback to make its work as useful as possible. Please send comments to communications@cbo.gov.
Phillip L. Swagel
Director
October 2024