7.2e Wealth

Wealth consists of the value of all assets, minus any individual or household debts. Assets include cash and physical items a person or household could convert into money, such as a home and other real estate, a vehicle, jewelry, or art.

Wealth is distributed inequitably in the United States (see Figure 7.5) and worldwide. In the United States, the top 1% controls 31.9% of the wealth, and the top 10% owns 69.2%. In contrast, 50% of U.S. adults altogether control a mere 2.8% of the wealth. Those in the top 10% of U.S. households have wealth valued at $1.6 million or higher (Sullivan, Hays, & Bennett, 2023) (see Figure 7.6).

Piketty (2022) describes the upper class wealth as taking multiple forms of financial investments: housing and other property, business assets, and financial assets (stocks, bonds, and securities). Middle-class members mainly hold wealth through housing and investments. The key difference between the middle and upper classes is that the middle class typically needs a house to live in, and their financial assets are often retirement savings accounts, such as IRAs and 401(k) plans. Members of the lower class have little to no savings.

Most U.S. households with any wealth hold it in the form of retirement accounts (60.3%) and equity in their home (62.2%) (Sullivan & Ghosh, 2024). While households can transform these assets into cash, there are financial penalties for withdrawing money from retirement accounts early, and a family usually needs their home to live in, making it a sacrifice to sell. On the other hand, households can borrow against these assets to pay for their children’s college education, start a business another endeavor that may improve their finances.