Middle-class families didn't have much money saved to begin with in 2007 -- $38,800. But by 2010, they had lost about 28 percent of that and were left with an average $27,300 in non-retirement assets, according to an analysis of government data on family finances released Tuesday by the Consumer Federation of America and Primerica Inc.
"Middle income families are the fabric of America, and they are struggling more than ever," said John Addison, co-CEO of Primerica, a financial services firm with $35 billion in assets under management based in Duluth, Ga. "We hear about the challenges families face. Too much month at the end of the money, and being sick and tired of being sick and tired."
The report, "Financial Status and Decision-Making of the American Middle Class," concluded that while they are not financially desperate, the financial condition of families making between $30,000 and $100,000 has gone downhill due to declining wages, the rising cost of the essentials of life and the enormous loss of wealth they suffered as a result of home values taking a dramatic turn for the worse.
Declining home values were identified in the report as the main reason that the net assets of the typical middle-income family suffered a 35 percent decline from $145,600 to $94,700 between 2007 and 2010. But two out of three people surveyed for the study said they had made at least one really bad financial decision, with the average loss costing $23,000.
"The survey does not reveal the kinds of bad decisions that were made, but I would be surprised if many of these decisions weren't related to credit card debt and subprime mortgages," said Stephen Brobeck, executive director of Consumer Federation of America, based in Washington, D.C. "It is less likely they made poor investment decisions on stocks because very few of them hold individual stocks."
The comprehensive analysis includes a national survey of 2,015 representative adult Americans by ORC International in July and a statistical examination of the Federal Reserve Board's 2010 Survey of Consumer Finances conducted by Catherine Montalto, a professor in the department of consumer sciences at Ohio State University.
According to Fed data, a typical middle-class family owned non-retirement, non-real estate assets valued at $27,000 in 2010. Nearly all of these families -- 98 percent -- had a checking or savings account, and the typical median amount in these accounts was $3,900. About 61 percent of them had money in a retirement account and these funds typically represented the bulk of their financial assets. The typical amount of retirement assets middle-class families had in 2010 was $29,000.
That year, 21 percent of middle-class households had a cash-value life insurance policy; 15 percent had stocks outside a retirement account; 14 percent had bank certificates of deposit and 13 percent owned U.S. Savings Bonds. The most commonly held asset was a car -- 94 percent of middle-class families owned a car, which had a typical value of $17,000.
For centuries, the American middle class has been considered the backbone of the country that grew more prosperous each year. But that progress has been halted, even reversed, according to the study.
The study also looked at how middle-class Americans rate their financial decision-making, with most saying they were "excellent" or "good" on a wide variety of financial issues. Yet few of them said their principal source of information or advice about several specific financial decisions would come from traditional sources such as the Internet, books, magazines or TV. A surprisingly high number -- 23 percent of the least-educated and 10 percent of the best-educated -- would seek no information at all about savings and investing before making a decision.
Those surveyed also were asked how they would invest for retirement. Their answers revealed very conservative views on investing. About 25 percent would invest the money in land, 21 percent would buy stocks, 6 percent would invest it in gold and 19 percent said they would stash the money in a bank account.
Tim Grant: firstname.lastname@example.org or 412-263-1591.