Using the 2007 Survey of Consumer finances, this Fact finds large differences in the level and composition of wealth across the income distribution. Before the recession, working-age families in the bottom-quintile had median net worth of $4,300 and held the majority of their wealth in housing. Top-quintile families had median net worth of over $500,000 and held less than one-quarter of their wealth in housing. With few liquid assets to draw from in case of a financial emergency, bottom-quintile families were in a vulnerable position at the onset of the recession.
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Even before the current recession, low-income families
had relatively few assets. Data from the 2007 Survey of
Consumer Finances show that working-age families in
the bottom income quintile had median net worth of
$4,300. These holdings are strikingly low compared
with the median net worth of over $500,000 for topincome-
quintile families (table 1). In fact, the median
net worth of bottom-income-quintile families was just
0.8 percent of the median net worth of top-incomequintile
families. With few assets, bottom-incomequintile
families were in a precarious financial position
at the onset of the economic slowdown, thus making
them vulnerable to economic hardship due to income
loss during the current recession.
The composition of wealth varies enormously across
the income distribution (figure 1). Bottom-incomequintile
families held the majority of their net worth in
housing (60 percent), while middle- and top-incomequintile
families held less than half of their wealth in
housing (47 and 22 percent, respectively). Thus, the net
worth of bottom-income-quintile families was more
likely affected by the recent burst of the real estate bubble. In contrast, bottom-income-quintile families held
only a small fraction of their wealth in financial assets
(3 percent) and retirement accounts (6 percent). These
meager holdings could have isolated bottom-incomequintile
families from the recent swings of the financial
markets. But low wealth also means that bottom-incomequintile
families have few liquid assets to draw from in
case of a financial emergency.
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