The Wealth Gains That Made 2020 a Banner Year for the Richest 1%
A pair of Birkin bags in a Hermes International luxury good boutique in Paris. (Photographer: Benjamin Girette/Bloomberg)

The Wealth Gains That Made 2020 a Banner Year for the Richest 1%

The rich got richer in the U.S. last year, as wealth created by rebounding stock and real-estate markets skewed toward high earners.

The richest 1% of households saw their net worth rise by some $4 trillion in 2020, meaning that they captured about 35% of the extra wealth generated nationwide, according to the latest quarterly study of household wealth from the Federal Reserve. The poorest half of the population, by contrast, got about 4% of overall gains.

The Wealth Gains That Made 2020 a Banner Year for the Richest 1%

Widening wealth gaps during the pandemic have become a key driver of policy for President Joe Biden’s administration, cited by officials as a reason for the proposed tax increases on high-income groups.

The following charts and tables show how U.S. household wealth gains in 2020 break down, according to the Fed data released late Friday.

Stocks and Funds

The wealthiest Americans benefited most from gains in stocks and mutual funds, as well as their ownership stakes in private businesses -- assets that aren’t widely owned by the bottom 90% of households.

The Wealth Gains That Made 2020 a Banner Year for the Richest 1%

Equity holdings accounted for the biggest wealth gains last year among the highest-earning households. Lower down the income ladder, other assets such as home equity or pension entitlements played a more important role.

The Wealth Gains That Made 2020 a Banner Year for the Richest 1%

Education Divide

Households without a college degree saw their share of the nation’s net worth shrink in 2020. Holders of a degree held 71.8% of the national total at the end of last year, an increase of a full percentage point, after adding $9.3 trillion in net worth.

The Wealth Gains That Made 2020 a Banner Year for the Richest 1%

By comparison, households without a high school degree saw their wealth shrink by $111 billion. This group now holds only 1.6% of the country’s wealth, a record low in data going back to 1989.

Age and Youth

The share of wealth held by Americans age 55 to age 69 is being squeezed, the Fed data show, while the age-groups immediately above and below them posted gains.

The 55-69 age cohort, made up of the younger portion of so-called Baby Boomers, saw its share fall to 42.8% from 43.6% a year earlier. Americans aged under 40 fared slightly better but still hold less than 6% of the national wealth -- roughly half their share in the late 1980s.

The Wealth Gains That Made 2020 a Banner Year for the Richest 1%

Racial Gaps

The challenges of racial inequality in the economy are near the top of the Biden administration’s agenda. The Fed’s data showed that wealth held by White Americans exceeded $100 trillion in 2020 for the first time, double what it was when the Great Recession ended in June 2009.

Other racial groups saw their wealth increase at a broadly similar pace in 2020 -- but from a much lower base. Despite declining home homeownership rates since the pandemic, Black Americans gained almost $150 billion in real estate equity last year, the largest gain in four years.

The Wealth Gains That Made 2020 a Banner Year for the Richest 1%

White Americans, who make up more than 60% of the total population, are older on average which generally means they’ve had more time to accumulate wealth. About 18.5% of the population is Hispanic and 13.4% is Black.

Fed researchers have pointed out how wealth or the lack of it can be transmitted across generations. “White families are both more likely to have received an inheritance and are also more likely to expect to receive an inheritance,” according to a study published last year.

Liquid Wealth

One big pandemic shift that emerges from the Fed data is the tendency for higher net-worth households to keep a chunk of their wealth in the most liquid form. The total amount of checkable deposits and currency surged past $3 trillion last quarter, up from $1.2 trillion at the end of March.

The Wealth Gains That Made 2020 a Banner Year for the Richest 1%

The increase may reflect greater caution amid the turmoil caused by Covid-19, as well as a lack of immediate spending opportunities during lockdowns.

©2021 Bloomberg L.P.

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