A new market sizing report examines Americans at risk for disruption in the financial marketplace and reveals that families with the least and most assets made the biggest strides in household wealth in the past four years, according to Hearts & Wallets.
The Hearts & Wallets report, “Portrait U.S. Household Wealth: Essential Building Blocks to Empower Fact-Based Strategy & Prioritization,” suggests there are fewer American households in the lowest asset group of less than $50,000 in investable assets. This group declined by 2.1 million, the only asset group to decrease in number of households during the past four years, even as the total number of households nationally increased by 3.5 million.
Of 49.4 million working Americans with less than $50,000 in investable assets, 33 million “wish they were doing a better job saving.” Of these nearly 21 million have little or no debt and are poised to accumulate assets.
“The really exciting news for American families is the progress made at the lower end of the investable asset spectrum,” says Laura Varas, CEO and founder of Hearts & Wallets. “To grow wealth from a small asset base takes a lot of work, and these families are succeeding through a combination of savings and a small assist from the capital markets. Families in this asset group are only one part of the fascinating, and evolving, wealth landscape in the U.S. The power of the Portrait building blocks allow firms to understand consumer groups of all financial profiles and develop products tailored to meet their needs.”
The data can be used to develop products and shape financial and retirement plan features for both existing solutions as well as solutions that have yet to be developed. For example, the report presents a market sizing exercise for “Income Management Tools for New Retirees.” The market for this existing solution is 3.5 million households with $3.7 trillion who use online tools and expect more than 30% of their retirement income from personal assets may be receptive to products to assist them in this major transition.
Hearts & Wallets analysis also found the lowest asset class is fairly evenly distributed as far as age goes. Only about one-third (29%) of households in 2017 in the less than $50,000 asset class were younger than 35 years of age. Another one-third are between the ages of 35 and 54.
Going beyond income to look at the saving rate for consumers younger than 35 with less than $100,000 in investable assets, 5.3 million households are saving 10% or more of their income annually.
Taxable assets ($30.7 trillion) are much bigger than retirement assets ($17.8 trillion) but growth rates are similar. The 10-year compound annual growth rate CAGR is around 5% for retirement assets and 6% for taxable assets. Within consumer-controlled retirement assets of $17.8 trillion, IRA assets are bigger than defined contribution at $8.3 trillion versus $7.0 trillion, but growth rates are similar at around 4% annually.
Growth in consumer-controlled retirement is slightly outpacing growth in pensions (4% CAGR vs. 3% CAGR). Total dollars in defined benefit (DB) plans is significantly less than consumer-controlled retirement assets at $12.5 trillion versus $17.8 trillion.The report can be found at http://www.heartsandwallets.com/.