New Index Examines Financial Resilience of Middle-Class Households

Improvements Found in Q2 as Inflation and Cost Pressures Continued to Moderate even while Wage Growth Decelerated.

WASHINGTON, Oct. 24, 2024 /PRNewswire/ -- The American Council of Life Insurers (ACLI) today released a new index that measures middle-class households' ability to manage financial challenges and plan for a stable future. ACLI's Financial Resilience Index analyzes key middle-class economic considerations to assess the direction and degree of change in middle-class financial resilience. By examining both cost-side and resource-side factors, the index offers a holistic picture of the drivers of financial resilience.

ACLI will release the Financial Resilience Index quarterly and use movements in the index to provide policymakers and others with insights about how middle-class America is faring.

"Helping Americans navigate financial shocks is at the heart of what life insurers do. We provide financial and retirement security to 90 million families through all stages of life," said ACLI President and CEO David Chavern. "The Financial Resilience Index generates a holistic picture of how middle-class households are navigating costs and sustaining their resources. Life insurers are part of the solution to help households build financial resilience, and we hope the index can inform those who share that goal."

October 2024 Financial Resilience Index Report

In Q2 2024, the Headline Index, the score used to measure household resilience, was 24.8, down 7 points from the previous quarter but up 34 points from Q2 last year. This suggests that middle-class financial resilience improved but more slowly than it has in previous quarters.

The data for Q2 indicates that inflation and cost pressures continued to moderate, but income growth decelerated. Overall, the index implies that middle-class households are growing more financially resilient, though gains are more gradual as easing cost pressures were partially offset by slowing resource growth.

In addition to the index, ACLI also released a Financial Resilience Survey – a nationally representative survey conducted quarterly by The Harris Poll – that complements the index's economic data. The survey offers a snapshot of how middle-class households are feeling about the state of their finances. It explores how middle-class respondents understand their own financial resilience by asking questions about economic mobility, financial stressors, financial stability, and safety nets.

According to the survey, daily essentials are the top cost pressure for middle-class households, with 38% reporting they are most concerned about sustainably affording these expenses – like groceries and electricity – over the next year.

In addition, middle-class households are most concerned about financial stress from a health event (40%) or an unexpected expense greater than $5,000 (37%).

"If inflation continues to cool this should lead to further cost pressure easing," said ACLI Chief Economist Andrew Melnyk. "The health of the labor market, however, will likely be the most important factor for middle-class financial resilience. Should the labor market remain healthy overall, middle-class households will continue to benefit from steady income. But if hiring were to slow substantially and unemployment increase, middle-class financial resilience could take a hit. As we wait to see if the economy has in fact achieved a 'soft landing', we are in a moment of economic uncertainty. That may be making middle-class households feel a little uneasy as they try to plan for the future."

About the Financial Resilience Index

ACLI's Financial Resilience Index, which will be released quarterly, measures the middle-class' ability to manage life's challenges and plan for a stable future. The index tracks 26 different variables that represent typical cost pressures for middle-class households (like housing, gas and childcare) and the financial resources that are available to meet them (like income, access to credit and retirement assets). By tracking the direction and magnitude of cost pressures and resources, the index reflects how middle-class financial resilience changes over time, and what is driving improvement or decline.

About the Financial Resilience Survey

ACLI's Financial Resilience Survey is a nationally representative survey conducted by The Harris Poll on behalf of ACLI, as a complement to the Financial Resilience Index. The survey explores how middle-class respondents understand their own financial resilience by asking questions about economic mobility, financial stressors, financial stability, and safety nets. The quarterly survey consists of two questions about financial resilience, one recurring that will be asked at the same time each year and one that will vary within the larger theme of middle-class financial health, stress, and resilience. Respondents of all household income levels respond to the survey, with reporting focused on middle-class respondents – those earning $50,000-$150,000 in annual household income.

ACLI's latest Financial Resilience Survey was conducted online within the United States by The Harris Poll on behalf of ACLI from September 3 – 5, 2024 among 2,092 adults ages 18 and older. The survey sample includes 998 respondents from middle-class households. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact ACLI.

For more information about both the index and the survey please visit: ACLI Financial Resilience Index.

The American Council of Life Insurers (ACLI) is the leading trade association driving public policy and advocacy on behalf of the life insurance industry. 90 million American families rely on the life insurance industry for financial protection and retirement security. ACLI's member companies are dedicated to protecting consumers' financial wellbeing through life insurance, annuities, retirement plans, long-term care insurance, disability income insurance, reinsurance, and dental, vision and other supplemental benefits. ACLI's 275 member companies represent 93 percent of industry assets in the United States.

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SOURCE American Council of Life Insurers