Working Paper

Do the Rich Really Save More? Answering an Old Question Using the SCF with Direct Measures of Lifetime Earnings and an Expanded Wealth Concept

Abstract: The question of whether affluent households save at a higher rate has been asked by economists on numerous occasions since the 1950s. It is standard in this research to identify affluent, or “rich,” households as those with high lifetime earnings or income to better ground the empirical question in relevant theory. Existing results in the literature, however, are mixed on whether rich households in fact save more than others, with some suggesting a generally flat savings profile across the distribution and others supporting the notion that the rich do indeed save more. Many of the empirical papers do not include direct measures of lifetime earnings, instead relying on proxies. Additionally, few include the full range of assets that are relied on for low and middle-income households to finance their retirement, and even fewer use data that include sufficient samples of households that are actually “rich.” The primary contribution of this paper is to combine all three in an examination of U.S. households. We use the 2022 Survey of Consumer Finances (SCF), which oversamples high net worth households, in combination with direct estimation of lifetime earnings developed in Jacobs et al (2021), to explore wealth to lifetime earnings ratios – the cumulative impact of savings over time – across the lifetime earnings distribution. In addition, we utilize an expanded measure of wealth which includes the asset value of defined benefit pensions (following Devlin-Foltz, et al, 2016 and Sabelhaus and Volz, 2019, 2022) and the public pension program, Social Security. We find a steep gradient of savings when defining rich households by their lifetime earnings, which crucially includes business incomes in households’ earnings. The steepness, though, does not manifest until the top deciles of lifetime earnings. Fagareng, Holm, Moll, and Natvik (2021) draw attention to the outsized contribution of capital gains in driving wealth accumulation of the rich; when we remove unrealized capital gains from our metrics, however, the gradient of the wealth–lifetime-earnings ratio is reduced but not removed.

JEL Classification: D14; D31; E21; G51;

https://doi.org/10.17016/FEDS.2025.097

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2025-10-31

Number: 2025-097