Assets and Wealth

Until the last decades of the twentieth century, little was known about the wealth of older adults. This was unfortunate since household wealth is an important complementary measure of command over economic resources. While we knew a good deal about income differences, little was known about how much personal wealth older people had and how and why that wealth got distributed. The principal reason was the absence of high quality data on the wealth holdings of older people. Fortunately, this problem was remedied during the 1990s by the availability of an important new data resource—the Asset and Health Dynamics of the Oldest Old (AHEAD).

AHEAD has fundamentally changed our knowledge about wealth holdings of older Americans. In addition to containing sufficient sample sizes for the elderly population, AHEAD is unique in its integration of high-quality economic modules alongside in-depth information about respondents' health, family structure, and cognition. During its baseline in 1993, AHEAD included 6,052 households (8,222 individuals) with a least one individual born in 1923 or earlier. In terms of substantive content, AHEAD focuses on the key concerns in this age group—the relationship of life-cycle changes in physical and cognitive health in old age to dissavings and asset decline. Individual respondents are followed up at two year intervals.

A distinct advantage of AHEAD compared to other surveys of older populations is that a very comprehensive and detailed set of questions were asked to measure household wealth. Besides housing equity, household assets were separated into the following eleven categories: other real estate; vehicles; business equity; IRA or Keogh; stocks or mutual funds; checking, savings or money market funds; CDs, government savings bonds, or treasury bills; other bonds; other assets; and other debt. The wealth data in AHEAD has been shown to be of generally high Table 1 Mean Net Worth by Race and Ethnicity (Households age 70 and over, July 2000, in dollars) SOURCE: Author quality (Juster and Smith). This improvement in quality appears to be largely the result of dedicated survey administrators and staff and the use of some new innovative survey methods that enhance the quality of wealth measurement in social science surveys.

The principal new technique that has enhanced data quality on household wealth is the use of what has been termed unfolding brackets. A persistent problem in household surveys that requested information about the values of assets involves very high levels of item nonresponse. Originally, this was thought to indicate a great reluctance to reveal sensitive information about a household's financial status, but it is now believed simply to reflect uncertainty about precise values. Unfolding brackets helped deal with that uncertainty by asking respondents who answered wealth questions with a "do not know" or "refuse" a series of sequential questions requesting that they place the values of their assets within certain prespecified limits. For example, unfolding brackets converted a 45 percent full item nonresponse in stock value in AHEAD to only 8 percent of cases with no information on value. The use of unfolding brackets also produced significantly higher estimates of wealth holdings among the elderly. For example, Juster and Smith show that mean nonhousing wealth is 9 percent larger due to the use of unfolding brackets in AHEAD.