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Assets and liabilities of younger vs. older households

New insights from the Research Division

The FRED Blog has discussed recent research from Yu-Ting Chiang and Mick Dueholm at the St. Louis Fed about how household liability-to-income ratios changed between 1995 and 2019. Today we showcase another piece of their research that answers the following question: Does the age of the head of the household impact the value of their liabilities relative to their assets?

The short answer is “yes.” Older households hold substantially more assets than liabilities than younger households because they have had more time to pay off debts and accrue savings.

The longer answer is also “yes,” but with a caveat. Read on to learn more about it.

The FRED graph above shows data from the Board of Governors of the Federal Reserve System on the total value of assets and liabilities held by all US households between 1998 and 2022. The value of the liabilities has been divided by the value of the assets to observe their relative growth more easily. That liabilities-to-assets ratio peaked in 2009.

The work by the two St. Louis Fed researchers finds that, between 1953 and 2019, both older and younger households experienced faster growth in liabilities than in assets, but they did so at varying rates. The liabilities-­to-assets ratio of the young grew 21 percentage points (from 0.41 to 0.62) and the ratio of the old grew 5 percentage points (from 0.13 to 0.18). These changes are possibly driven by the increase in life expectancy and the aging of the population since the 1950s.

For more about this and other research, visit the website of the Research Division of the Federal Reserve Bank of St Louis, which offers an array of economic analysis and expertise provided by our staff.

How this graph wase created: Search FRED for “Households; Total Liabilities, Level.” Next, click the “Edit Graph” button and use the “Add Line” tab to search for and add “Households; Total Assets, Level.” Last, type the formula a/b and click on “Apply.”

Suggested by Diego Mendez-Carbajo.

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