Executive Summary

Many households in the United States have been tested by the Great Recession. Large-scale financial strain at the household level ultimately fed into broader economic challenges for the country, and the completion of the national recovery will ultimately be, in part, a reflection of the well-being of households and consumers. Because households' finances can change at a rapid pace and new opportunities and risks may emerge, such recovery can be complex to monitor.

To better understand the financial state of U.S. households, the Federal Reserve Board conducted a new consumer survey, the results of which are described in this report. The Survey of Household Economics and Decisionmaking (SHED) was conducted by the Board's Division of Consumer and Community Affairs in September 2013 using a nationally representative online survey panel. The purpose of the SHED was to capture a snapshot of the financial and economic well-being of U.S. households and the issues they face, as well as to monitor their recovery from the Great Recession and identify perceived risks to their financial stability. It further collected information on households that was not readily available from other sources or was not available in combination with other variables of interest.

Key Findings

This report presents findings from the September 2013 survey. The survey covered a range of topics--including household financial well-being, housing, credit availability, borrowing for education, savings, retirement, and medical expenses--meant to round out the understanding of how households are faring financially.

Overall, the survey found that many households were faring well, but that sizable fractions of the population were at the same time displaying signs of financial stress:

• Over 60 percent of respondents reported that their families are either "doing okay" or "living comfortably" financially; another one-fourth, however, said that they were "just getting by" financially and another 13 percent said they were struggling to do so
• The effects of the recession continued to be felt by many: 34 percent reported that they were somewhat worse off or much worse off financially than they had been five years earlier, 34 percent reported that they were about the same, and 30 percent reported that they were somewhat or much better off
• 42 percent reported that they had delayed a major purchase or expense directly due to the recession, and 18 percent put off what they considered to be a major life decision as a result of the recession
• Just over half of respondents were putting some portion of their income away in savings, although about one-fifth were spending more than they earned
• 61 percent reported that they expected their income to stay the same in the next 12 months, while 21 percent expected it to increase and 16 percent expected it to decline

The survey asked questions about a number of specific aspects of households' financial lives:

Homeowners

Homeowners' outlooks for their local housing markets were generally positive

• A plurality of homeowners expected house prices in their neighborhood to increase over the 12 months following the survey, with 26 percent expecting an increase in values of 5 percent or less and 14 percent expecting an increase in values of greater than 5 percent
• Less than 10 percent of homeowners expected house prices in their neighborhoods to decline over the 12 months following the survey
• 45 percent of homeowners who had owned their home for at least five years reported that the value of their home was lower than in 2008, 20 percent believed the value of their home was the same, and 27 percent believed it was higher than in 2008

Renters

Many renters seemed to express an implied interest in homeownership

• The most common reasons cited by renters for renting rather than owning a home were an inability to afford the necessary down payment (45 percent) and an inability to qualify for a mortgage (29 percent)
• 10 percent of renters reported that they were currently looking to buy a home

Credit experiences and expectations

For some, perceived credit availability remains low

• 31 percent of respondents had applied for some type of credit in the prior 12 months
• One-third of those who applied for credit were turned down or given less credit than they applied for
• 19 percent of respondents put off applying for some type of credit because they thought they would be turned down
• Just over half of respondents were confident in their ability to obtain a mortgage, were they to apply
• Experience with credit appears to vary by race and ethnicity, with non-Hispanic blacks and Hispanics disproportionately likely to report being denied credit, to put off applying for credit, and to express a lack of confidence about successfully applying for a mortgage, though these effects are partially explained by other factors correlated with race/ethnicity and credit, such as education

Financing of education

The perceived value of borrowing to fund postsecondary education varied widely depending on program completion, type, and major

• 24 percent reported having education debt of some kind, with 16 percent having acquired debt for their own education, 7 percent for their spouse/partner's education, and 6 percent for their child's education
• Among those with debt for education, the average amount of all education debt (both for the respondent's and others' education) was $27,840, with a median of $15,000
• For those with each type of education debt, the average amount of debt for respondents' own education was $25,750; $24,593 for their spouse/partner's education; and $14,923 for their children's education
• Some households struggle to service this debt, with 18 percent of those with debt for their own education indicating that they were behind on payments for these loans or reporting that they had loans in collections
• Among those with debt for their own education, those who failed to complete the program they borrowed money for were far more likely to report having to cut back on spending to make their student loan payments (54 percent versus 39 percent for those who completed) and to believe that the costs of the education outweighed any financial benefits they received from the education (56 percent versus 38 percent for those who completed)
• Among those with debt for their own education, the respondent's field of study appears to impact whether they believed the lifetime financial benefits of their education outweighed the costs of that education

Savings

Savings are depleted for many households after the recession

• Among those who had savings prior to 2008, 57 percent reported using up some or all of their savings in the Great Recession and its aftermath
• 39 percent of respondents reported having a rainy day fund adequate to cover three months of expenses
• Only 48 percent of respondents said that they would completely cover a hypothetical emergency expense costing $400 without selling something or borrowing money

Retirement

Many households reported that they are not prepared for retirement

• Almost half of respondents had not planned financially for retirement, with 24 percent saying they had given only a little thought to financial planning for their retirement and another 25 percent saying they had done no planning at all
• 31 percent of respondents reported having no retirement savings or pension, including 19 percent of those ages 55 to 64, and 25 percent didn't know how they will pay their expenses in retirement
• Among those ages 55 to 64 who had not yet retired, only 18 percent planned to follow the traditional retirement model of working full time until a set date and then stop working altogether, while 24 percent expected to keep working as long as possible, 18 percent expected to retire and then work a part-time job, and 9 percent expected to retire and then become self-employed
• The Great Recession pushed back the planned date of retirement for two-fifths of those ages 45 and over who had not yet retired
• 15 percent of those who had retired since 2008 reported that they retired earlier than planned due to the recession, while only 4 percent had retired later than expected
• Social Security Old-Age benefits were commonly included as a source of funds for people currently retired (74 percent), followed distantly by defined benefit pension payments from work (44 percent) and savings outside a retirement account (32 percent)

Medical expenses

Paying for medical care was challenging for some households

• 34 percent of respondents reported going without some form of medical care in the prior 12 months because they could not afford it
• 43 percent of respondents reported that they could not afford to pay for a major medical expense out of pocket, and 34 percent reported that it is only somewhat likely that they could afford to pay
• 24 percent of respondents experienced what they described as a major unexpected medical expense that they had to pay out of pocket in the prior 12 months

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