WASHINGTON—Americans are feeling more positive about their finances and especially optimistic about their future prospects, even though half report not having enough money to cover a $400 expense.
The Federal Reserve Board's latest survey of the financial and economic conditions of American households has found that individuals' overall perceptions of financial well-being improved modestly between 2013 and 2014, but their optimism about future financial prospects increased significantly.
The Fed said its 2014 Survey of Household Economics and Decisionmaking, which seeks to provide new insight into Americans' economic security, housing and living arrangements, banking and credit access, education and student loan debt, savings behavior, and retirement preparedness, found that 65% of adult respondents consider their families to be either "doing okay" or "living comfortably" financially—an increase of three percentage points from the 2013 survey.
“Looking forward, households are increasingly optimistic,” the Fed noted. “Twenty-nine percent of survey respondents say they expect their income to be higher in the year following the survey, compared to 21% of 2013 respondents.”
But the survey also reveals a lack of economic preparedness among many adults. Only 53% of respondents indicate that they could cover a hypothetical emergency expense costing $400 without selling something or borrowing money. Thirty-one percent of respondents report going without some form of medical care in the past year because they could not afford it.
Among the other findings:
- The outlook for the housing market among surveyed homeowners remained generally positive, as 43% believe that their house increased in value over the past year and 39% expect home values in their neighborhood to rise in the coming year.
- Many renters also express an interest in buying but report financial barriers to homeownership, with half of all renters listing an inability to afford a down payment as a reason why they rent rather than own and 31% citing an inability to qualify for a mortgage as a reason for renting.
- Twenty-three percent of the adult population has some form of education debt, according to the Fed survey. However, this debt is not exclusively student loans. Fourteen percent of those with education debt say that some of that debt is on credit cards. Individuals who did not complete an associate or bachelor's degree, first generation students, blacks and Hispanics, and those who attended for-profit institutions, are all disproportionately likely to be behind on repaying their student loan debt, the Fed said.
- The survey results also suggest that many individuals are not adequately prepared for retirement. Thirty-one percent of non-retirees have no retirement savings or pension, including nearly a quarter of those older than 45. Even among individuals who are saving, fewer than half of adults with self-directed retirement savings are mostly or very confident in their ability to make the right investment decisions when managing their retirement savings.
- Consistent with a lack of preparedness for retirement, 38% of non-retired respondents say that they either do not plan to retire or plan to keep working as long as possible. Among lower-income respondents, whose household income is less than $40,000 per year, 55% plan to keep working as long as possible or never plan to retire.