Net Worth of Old-Age and Survivors By Erna Magnus* THE SECURITY of retired workers and survivor families in receipt of old-age and survivors insurance benefits is affected not only by the amount and sources of the family's income but also by the savings accumulated during the wage earner's working life. Information was gathered by representatives of the Bureau of Old-Age and Survivors Insurance on the resources of 3,529 beneficiary families in 7 large cities in 1941-42 and of 962 beneficiary families in 12 middle-sized Ohio cities in 1944. The data obtained in these surveys showed that the great majority of the aged men and women beneficiaries and many widows with children entitled to survivor benefits had some savings that had been accumulated during the wage earner's working life. Some beneficiaries, however, had liabilities that tended to reduce the amount of savings available for an emergency or for current living. The protection afforded by savings is therefore determined by the amount by which a beneficiary's assets exceed his liabilities. This excess of the value of assets over liabilities may be said to constitute a beneficiary's net worth or net savings. Information obtained in 1941-42, as well as in 1944, showed furthermore that a substantial proportion of aged as well as survivor beneficiary families used their savings to meet current living expenses or else incurred debts during the 12 months immediately preceding the interview. This article discusses the net worth of beneficiaries included in the different surveys and their income deficits for the year studied, which they met either by using savings or incurring debts. As used in this study, assets include cash on hand or in savings or checking accounts, the market value of stocks and bonds, loans to others, the Bureau of Old-Age and and Survivors Insurance, Analysis Division. 1 For a discussion of earlier analyses see the Bulletin, July and September 1943; January, April, May, September, and November 1945; January 1946; and August 1947. market value of owner-occupied real estate, net equity in all other real estate, and the equity in an independent business. Liabilities comprise unpaid bills, mortgages on owner-occupied real estate, borrowings on life insurance policies, and other borrowings, whether or not secured by collateral. Because the necessary information was not available for some of the surveys, the cash surrender values of life insurance policies have not been included among the assets. Although this exclusion tends to understate the value of net worth for some beneficiaries, careful estimates of cash surrender values of the insurance policies of beneficiaries in one survey-Philadelphia and Baltimore-indicate that the understatement is in most cases quite small. The value of annuities and trust funds and the balances due on death benefits scheduled to be paid in installments over a period of years have also been excluded from the assets of beneficiary groups' because these funds could not be drawn on at the discretion of the beneficiaries. The Whenever possible, the beneficiary's own report of the value of his assets was verified from other sources. value of stocks and bonds was checked against market quotations; the family's own appraisal of the market value of real estate was occasionally revised on the basis of the assessed values, the judgment of real estate agents, or the selling price of similar homes in the same community. In some instances the beneficiary's estimate of the market value of an independent business was accepted; in others, it was derived by capitalizing the income at 6 percent. "The "beneficiary group" includes the primary beneficiary, his or her spouse, and unmarried children under age 18, or the widow and unmarried children under age 18. Net Worth The proportion of beneficiary groups reporting assets in excess of liabilities varied considerably among the several survey areas (table 1). The beneficiaries in the three Southern cities were more heavily concentrated in the lowest net-worth brackets than were those in any of the other survey areas. The beneficiaries in the Los Angeles survey, on the other hand, had on the whole a higher net worth than those in any of the other three 1941-42 surveys; the proportion with no net worth was relatively small, while a relatively large proportion was in the high brackets. Average net worth was still higher among beneficiaries in the survey of 12 middle-sized cities in Ohio in 1944. For example, the median net worth of nonmarried men was $50 in Los Angeles but $1,306 in Ohio; for men with Table 1.-Net worth: Percentage distribution of beneficiary groups by net worth, end of survey year, five surveys-Continued entitled wives the corresponding amounts were $2,869 and $4,000. The comparatively high level of net worth of the Ohio beneficiaries may be partly explained by the large proportion owning homes and owning them clear of mortgage. The inflated real estate values in 1944 raised the net worth of these home owners. Average net worth also varied considerably among the different types of beneficiary groups. Differences might have been anticipated in view of the fact that the ability of persons to accumulate net savings depends largely on their income during their working lives. Since with few exceptions wages formed the bulk of the beneficiaries' income before they became entitled to insurance benefits, it is not surprising to find that nonmarried men, and women with benefits on their own wage records-the two types of beneficiary groups whose average monthly wages were lowestreported assets in excess of liabilities least frequently. If they reported any net savings, the values were, on the average, smaller than for other types of beneficiary groups. Table 2.-Net worth: Percentage distribution of male primary beneficiaries and widows with entitled children, by net worth and race, Birmingham, Memphis, and Atlanta 758 203 216 323 186 69 134 100.0 100.0 100.0 Percentage distribution Assets exceed liabilities by group and net worth Less than $1,000.. 18.8 18.7 3,000-4,999. 14.6 7.9 17.1 17.0 8.6 5,000-9,999. ficiaries. Liabilities exceed 87 21.1 45.8 On the basis of median net worth, the various beneficiary types fall into two rather distinct groups. In the four 1941-42 surveys, the two types of couples and the aged widows had as a rule the highest average net worth. Their medians ranged from $1,104 to $2,869, except for men with nonentitled wives and aged widows in the Southern cities, whose median net worths were $353 and $799, respectively. In marked contrast were the nonmarried men, female primary beneficiaries, and widows with entitled children. The median net worth of these types ranged from zero to $449, except for widows with entitled children in Los Angeles, who had a The median net worth of $1,000. same grouping occurs in the Ohio survey but on a higher level. Only a comparatively small proportion in each type had a net worth of $10,000 or more. In general the proportion was largest among married men with entitled and nonentitled wives (5 to 17 percent) and smallest among widows with entitled children (2 to 6 percent) and women with benefits on their own wage records (0 to 9 percent). None of the female primary beneficiaries in the Philadelphia-Baltimore and St. Louis surveys, and none of the aged widows in the Philadelphia-Baltimore survey, had assets valued at $10,000 or more in excess of their liabilities. The highest values of net worth reported were as follows: Ohio cities $38, 279 $68, 000 $67, 223 $31,900 $108, 985 35,000 150, 000 62, 000 75, 900 402, 250 62, 868 76, 100 129, 926 281, 000 38, 478 4,932 5,020 21, 955 29, 110 13, 566 with en- 41, 219 10,000 or more. Median See footnotes at end of table. Marked differences were found between the net worth of white and Negro beneficiary groups in the three Southern cities. Such differences were to be expected because the average monthly wages on which benefits are computed were much lower for Negro beneficiaries as a group than for the white beneficiaries. Among all male primary beneficiary groups, for example, 2 out of 3 in the white group, in contrast to only 2 out of 5 in the Negro group, reported a sets in excess of liabilities (table 2 Not only smaller proportions of th Negro than of the white beneficia groups reported any net worth, bi the amount of net worth tended to! much lower among the Negro group Thus, 59 percent of the Negro as con pared with 33 percent of the whi male primary beneficiaries had a n worth of zero or liabilities in excess assets; 25 percent of the Negroes ar 17 percent of the white beneficiaries had less than $1,000 in net worth, while 28 percent of the white but only 1 percent of the Negro beneficiaries had a net worth of $3,000 or more. Larger proportions of white than of Negro beneficiaries had some investment in the home that they occupied. Similarly, a smaller proportion of the Negro (46 percent) than of the white widows with entitled children (65 percent) had assets in excess of liabilities; moreover, the Negro widows were concentrated in the low networth brackets to a larger extent than the white widows. Altogether, 88 percent of the Negro widow-child groups as compared with 48 percent of the white widow-child groups had either no net worth or net worth of less than $1,000. No Negro widow had net savings of as much as $3,000. Net Worth and Income From Permanent Sources The data from all surveys and for all types of beneficiary groups indicate a positive relationship between net worth and amount of independent income from reasonably permanent Table 3.-Net worth and independent income from reasonably permanent sources: Percentage distribution of beneficiary groups by net worth and independent income, four 1941-42 surveys combined-Continued Percentage distribution based on less than 30 cases. Includes beneficiary groups consisting of male primary beneficiary, nonentitled wife, and entitled children. Excludes 15 male primary beneficiary groups whose net worth was unknown (7 with $300-599, 5 with $600-899, and 3 with $900 or more permanent income). Includes beneficiary groups whose assets and liabilities balanced. Average based on all beneficiary groups in type. 99 4.0 1.0 18.2 Excludes 4 nonmarried men whose net worth was unknown (1 with $300-599, 1 with $600-899, and 2 with $900 or more permanent income). Excludes 6 married men with entitled wives whose net worth was unknown (4 with $300-599, and 2 with $900 or more permanent income). Excludes 5 married men with nonentitled wives whose net worth was unknown (2 with $300-599, 2 with $600-899, and 1 with $900 or more permanent income). Excludes 4 female primary beneficiary groups whose net worth was unknown (2 with $300-599, and 2 with $600-899 permanent income). sources during the survey year. Such income includes, in addition to a year's old-age and survivors insurance benefits, veterans' pensions, annuities, receipts from stocks and bonds, interest on bank deposits, net income from real estate, retirement pay, and the value of imputed rent of owned homes; it indicates, to some extent at least, the relative economic status of beneficiaries before retirement. As income from reasonably permanent sources increased, beneficiaries were more likely to have assets in excess of liabilities, and the amount of their net worth increased. In all survey areas the majority of beneficiaries with permanent income of less than $300 had no assets and no liabilities, or liabilities in excess of assets, or a net worth of less than $1,000; relatively few had a net worth of $1,000 or more. This relationship is shown in table 3, which combines the data from the four 1941-42 surveys. For example, 70 percent of the married men with nonentitled wives who had permanent incomes of less than $300 either had no assets or liabilities (43 percent) or had liabilities in excess of assets (27 percent); not more than 7 percent had a net worth of $1,000 or more; less than 1 percent had assets in excess of liabilities valued at $5,000 or more. On the other hand, the beneficiary groups of each type who had permanent incomes of $900 or more ir.cluded only a small proportion with no assets or liabilities or with liabilities in excess of assets; a comparatively large proportion had a net worth of $5,000 or more. For the primary beneficiary types with $900 or more in permanent income, only 4 to 8 percent had no assets or assets that did not exceed their liabilities; 52 to 64 percent had a net worth of $5,000 or more. The median net worth of the various types of primary beneficiary groups with independent incomes of $900 or more from reasonably permanent sources ranged from $5,526 to $7,007; for survivor beneficiary types, the corresponding range was $5,500 to $8,500. Among primary beneficiaries with relatively high permanent incomes, married men with entitled wives had the highest level of net worth, 64 percent having savings of $5,000 or more in excess of liabilities. The relationship between family insurance benefit and value of net worth is similar to that found between total income from permanent sources and net worth. This relationship might have been anticipated, because for many beneficiaries insurance benefits form the major part of reasonably permanent income, particularly for those in the low income groups. Net Worth and Kinds of Assets The level of living and the security of beneficiary groups are affected by the forms in which their savings have been made. Some kinds of assets, such as tenant-occupied real estate, provide current money income; a home owned by a beneficiary provides a noncash income; and, finally, cash and other assets readily convertible into cash may be used to supplement current income. An analysis of the sources of beneficiary group income indicates that many beneficiaries received some money income from savings accounts, stocks or bonds, or real estate. In most instances, however, the amounts received were small, contributing little to the beneficiary groups' spendable funds. Home ownership.—Vastly more important than money income from asset holdings for the various types of beneficiary groups was the value of income in kind provided by the beneficiary's equity in his home. Home ownership contributed significantly to the level of living and security of many beneficiaries. For each type of beneficiary group the differences in extent of home ownership among the 1941-42 surveys were comparatively small (table 4). On the whole, the proportions were largest (29 to 65 percent) in Philadelphia and Baltimore and smallest (10 to 54 percent) in St. Louis. Between these two surveys were Los Angeles (21 to 63 percent) and the three Southern cities (26 to 54 percent). From 7 to 41 percent of the various types of beneficiary groups in the early surveys owned their homes free of mortgages. These beneficiaries constituted more than half of those who owned their homes. In Ohio, each of the beneficiary types included a larger proportion of home owners (46 to 75 percent) than the same type in the larger cities surveyed in 194142; and a larger proportion of beneficiary groups (33 to 59 percent) owned their homes free of mortgage. This situation may be indicative of different modes of living as between middle-sized and metropolitan cities. Among the different types of beneficiary groups, with the exception of aged widows in St. Louis, the two types of married couples included the largest proportions enjoying the security provided by home ownership. In the five surveys, 47 to 75 percent of them owned their homes, and 27 to 59 percent owned them free of mortgage. On the other hand, nonmar ried men and women primary bene ficiaries included the smallest pr portions of home owners (10 to 4 percent). Between these two e tremes were the widow-child ben ficiary groups and aged widows, whom 34 to 66 percent were ho owners. For one survey, Philadelphia a Baltimore, the number of years hom had been owned and the market val of the houses were studied. In t survey, half the primary beneficiar who were home owners had had equity in their homes for at least years, and half the aged widows owned their homes had owned th for 25 years. Many beneficiaries |