How You Doin’?

In September 2013, the Federal Reserve Board’s Division of Consumer and Community Affairs conducted a poll titled Survey of Household Economics and Decisionmaking (SHED).  Decisionmaking is not a typo, that’s what they called it. It was done in order to get a snapshot of the financial well-being of U.S. households.  They looked at issues that households consider risks to financial stability.  There were 4,134 surveys that qualified as complete used to compile the recently published data.  What follows is a brief summary.

Current conditions were mixed.  Over 60 percent of the respondents reported that their household was either “doing ok” or “living comfortably” financially.  The rest of those responding characterized their situation as either “just getting by” or “struggling to get by” financially.  Americans’ ability to save seems mixed also.  A little over half were putting away some money into savings, but about 20 percent said that they are spending more than they earn.  Only 48 percent of the respondents said they could cover a hypothetical emergency costing $400 without selling something or borrowing money.

Perception about credit availability is low while the perceived value of borrowing to fund a postsecondary education was assorted.  In the prior 12 months, 31 percent of those polled applied for some form of credit, and one-third of them were declined or given less than they applied for.  Just over half of the respondents felt they could obtain a mortgage if they were to apply.  Of those who completed college, 39 percent felt the cost of education outweighed the financial benefits they received from the education.  Among those with debt for education, the average amount they were in the hole was $27,840 and the median amount was $15,000.

Responses about retirement and medical expenses were not very cheery either.  Nearly one-third of the respondents have no retirement savings, including 19 percent in 55 to the 64 age range!  Of those nearing retirement, only 18 percent expect to stop working altogether, while 24 percent expect to work as long as possible.  Paying for medical care was challenging for many of those polled, including 34 percent that reported going without some form of medical care in the prior 12 months because they could not afford it.  A surprisingly large number, 24 percent, experienced what they described as a major unexpected medical expense that they had to pay out of pocket in the prior 12 months.

It is not like the majority of America is doing poorly, but there are enough Americans who are vulnerable to certain types of shocks (financial, medical, or both) that Atlas’ long-term outlook tends to skew negatively.  Skating on thin ice only becomes life threatening when the frozen water breaks.  Likewise, the pleasant American experience will go on until the structure fails.  (by C. Cox)