Fed’s Survey Of Economic (Un)Well-Being

The Federal Reserve Report on the Economic Well-Being of U.S. Households in 2017 was recently released.

The Federal Reserve Board’s Division of Consumer Affairs 5th annual Survey of Household Economics and Decisionmaking is designed to gain understanding of how adults in the U.S. feel about the state of their finances.

A sample of 12,000 received the survey in late 2017. What’s unique about the study in my opinion, is that it tackles subjective well-being from a financial perspective and emerging issues that may be formidable obstacles in the future. For example, this year for the first time the study included questions related to opioids.

Overall, respondents feel better about their overall financial situation as the economy has improved since the genesis of the survey. However, the continued rapid growth in wealth disparity threads throughout the analysis. Also, the disappointing state of retirement preparation and the cancerous effects of financial illiteracy remain chronic for the Americans surveyed.

Direct-from-the-survey positive highlights:

When asked about their finances, 74 percent of adults said they were either doing okay or living comfortably in 2017—over 10 percentage points more than in the first survey in 2013.

Individuals of all education levels have shared in the improvement over the past five years, though the more educated still report greater well-being than those less educated.

Less than one-fifth of non-retired adults are pessimistic about their future employment opportunities, although pessimism is greater among those looking for work or working part time for economic reasons.

Slightly over 7 in 10 adults keep track of their spending and over half follow a budget or spending plan.

The 7 percent of adults in 2017 who find it difficult to get by financially is about half of what was seen in 2013.This decline in financial hardship is consistent with the decline in the national unemployment rate over this period.

Nearly three-quarters of adults say they are either living comfortably (33 percent) or doing okay (40 percent), when asked to describe how they are managing financially. The share who are at least managing okay has risen consistently over the past five years and is over 10 percentage points higher than in 2013 when this survey began.

Areas of concern or importance:

About one-fifth of adults (and one-quarter of white adults) personally know someone who has been addicted to opioids. Exposure to opioid addiction was much more common among whites—at all education levels—than minorities. Those who have been exposed to addiction have somewhat less favorable assessments of economic conditions than those who have not been exposed.

Three in 10 adults participated in the gig economy in 2017. This is up slightly from 2016 due to an increase in gig activities that are not computer or internet-based, such as child care or house cleaning.

Four in 10 adults, if faced with an unexpected expense of $400, would either not be able to cover it or would cover it by selling something or borrowing money. This is an improvement from half of adults in 2013 being ill-prepared for such an expense.

Over one-fourth of adults skipped necessary medical care in 2017 due to being unable to afford the cost.

Less than two-fifths of non-retired adults think that their retirement savings are on track, and one fourth have no retirement savings or pension whatsoever.

Older adults are more likely to have retirement savings and to view their savings as on track than younger adults.Nevertheless, even among non-retirees in their 50s and 60s, one in eight lacks any retirement savings and less than half think their retirement savings are on track.

Three-fifths of non-retirees with self-directed retirement savings accounts, such as a 401(k) or IRA, have little or no comfort in managing their investments.

Many adults are struggling to save for retirement, and less than two-fifths feel that they are on track with their savings. While preparedness for retirement increases with age, concerns about inadequate savings are still common for those near retirement age.

On average, people answer fewer than three out of five basic financial literacy questions correctly, with lower scores among those who are less comfortable managing their retirement savings.