Component 4: Financial Security

Are Massachusetts households accumulating assets to withstand shocks and retire comfortably in the future?

Making it into the middle class has always meant more than having enough income to live well from month-to-month. It also implies some measure of financial stability and independence. The previous sections measured the share of Massachusetts households able to attain a middle-class standard of living. We derived these figures by comparing actual household incomes to a prototypical middle-class budget, which included adequate emergency and retirement savings. This section presents income volatility, savings, and financial distress measures that provide a more direct look at financial security. While income has become slightly less stable over the past two decades, household savings, investments, and wealth appear to be increasing to help buffer increased volatility.

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Introduction

Financial security is central to how Americans understand the middle class. Given a list of options, nine out of 10 adults responding to a 2024 Washington Post poll selected a secure job, health insurance, the ability to pay bills on time, the ability to afford emergency expenses without going into debt, the ability to save for the future, and the ability to retire comfortably as the most essential parts of being middle class.¹

MassINC’s 2026 Middle Class Poll found that many Massachusetts residents are finding it difficult to build and maintain financial stability. More than 40 percent of respondents said that after paying their monthly bills, they had little or no income remaining for savings and discretionary spending. Likewise, more than half said their financial situation had delayed or prevented them from saving for retirement. When asked how they would use additional income, nearly two-thirds of respondents ranked saving for the future among their top two priorities, a higher share than for any other choice.²

Reliable measures of financial security for middle-class households are limited, making it difficult to fully validate these concerns and how they affect varying household types with the same nuance as previous sections offered. However, by combining data from multiple sources, it is possible to benchmark the financial security of the median Massachusetts household (and in some cases, middle-income households), both over time and relative to other states. This section presents this suite of indicators, including income volatility, savings and investment income, household debt, home equity, and personal bankruptcy filings.

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1. Income Volatility

Income volatility is a measure of the stability of financial resources over time. Large swings in income from one year to the next can make it difficult to plan, pay down debt, build savings, qualify for home loans, or absorb unexpected expenses. Swings can occur when workers lose hours, experience unemployment, or when the number of earners in a household changes. However, volatility is not always a negative event. Households may see income rise sharply when a worker gets a better job, a bonus, or a promotion.

Measure 1A provides an indicator of income volatility by following a subsample of households who responded to the Current Population Survey (CPS) in two consecutive years and examining how much the earnings of these households varies from year to year. Higher values mean greater volatility.³

Since the mid-2000s, household income has become less predictable nationally as well as in Massachusetts. The Massachusetts series has more noise due to small sample sizes, but even so, the broad pattern is similar to the national trend: household incomes were somewhat more stable in the mid-2000s and became more volatile after the early 2010s.

Shifting to percentiles puts this pattern in more concrete terms. In 2005, the middle half of Massachusetts households (those with income falling between the 25th and 75th percentiles) had year-to-year real income changes ranging from a 33 percent loss to a 20 percent gain. By 2024, that middle range had widened to a 35 percent loss to a 33 percent gain. This suggests that more of the increased variability is coming from uneven gains as opposed to losses. Households may be increasingly getting ahead through discrete jumps in income, such as job changes or promotions, rather than through steady annual increases.

The shift to increased income volatility during the 2010s does not appear to be driven by household composition changes. When the analysis is restricted to individuals in households with the same composition between years, the volatility measure remains similar and shows a comparable increase.

Every year between 2005 and 2024, an average of roughly 30 percent of Massachusetts families experienced a year-to-year real income loss of at least 20 percent, and roughly 12 percent experienced a loss of at least 50 percent. But this risk does not appear to have worsened meaningfully over time: Changes between 2005 and 2024 are not statistically significant. This suggests that rising income volatility is not primarily a story of more families experiencing large downward shocks. Instead, the increase appears to reflect a broader widening of year-to-year income movement: more families experiencing modest fluctuations as a regular feature of economic life, combined with larger upside changes for some families.

Still, the level of downside risk is striking. A substantial share of Massachusetts families experience large income losses from one year to the next. This is consistent with other research documenting widespread income volatility in the US.⁴

Taken together, these data reflect a less secure labor market, as employers and tech platforms shift risk to workers through variable schedules, contingent work arrangements, temporary work, or gig work.

Importantly, even upward volatility can create financial strain if income gains are temporary, unpredictable, or preceded by losses. Prior research finds that households with volatile income—whether gains or losses—report lower financial well-being and have less savings than households with more stable income.⁵ Those who regularly tap savings to manage uneven earnings may have greater difficulty packing funds away for emergencies, retirement, or other long-term goals.

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2. Income from Savings and Investments

Savings and investments are one way households can turn income into financial stability. They help families absorb shocks—such as lost work hours, medical bills, car repairs, or rent increases—without turning a temporary setback into a crisis. They also help households manage uneven income. Over the longer term, savings and investments make it easier for families to take advantage of opportunities that require upfront resources, including buying a home, paying for education, starting a business, or helping children transition into adulthood.

Publicly available data do not provide a complete picture of household savings and investments at the state level on an annual basis. However, two federal surveys provide partial measures that, together, help show both access to financial assets and the approximate scale of those assets. The CPS reports whether households receive interest or dividend income. This “yes” or “no” measure does not capture total dollar amounts; a few dollars of interest income are treated the same as substantial investment income. Still, it provides a useful signal of whether the number of households with these financial assets has increased over the past two decades. The Census Bureau’s Survey of Income and Program Participation (SIPP) provides a more direct measure of balances held in financial institutions, including checking accounts and other interest-earning accounts, for recent years.

The CPS has a large-enough sample to estimate interest and dividend income for households in the middle of the state’s income distribution (the 25th to 75th percentiles). With a relatively small sample, the SIPP provides account balance levels for the median household. But this median estimate is only among those with such balances and we only have these data for the past few years.

Middle-income households in Massachusetts are more likely than their national peers to report interest income from savings or other interest-bearing assets. In 2024, 86 percent of middle-income households in Massachusetts reported interest income, compared with 75 percent nationally. The share reporting interest income increased substantially over the past decade, rising by 12 percentage points in Massachusetts from 2014 to 2024 and by 11 percentage points nationally.

In 2023, the median Massachusetts asset-holding household held about $22,700 in assets at financial institutions, including $5,360 in checking accounts and $16,000 in other interest-earning accounts. These balances suggest that many households have some liquid or semi-liquid financial assets, but they also underscore the limits of these buffers in a high-cost state. Even for households with savings, median balances may cover only a limited period of lost income or a handful of major expenses, especially when compared with the annual cost of maintaining a middle-class standard of living in Massachusetts.

Massachusetts ranks 10th among states in the share of middle-income households reporting interest income. Interestingly, most of the other states that rank higher are also in New England. New Hampshire has the highest rate, with 94 percent of middle-income households reporting interest income—8 percentage points higher than in Massachusetts. The broader picture is therefore mixed: Massachusetts households are relatively likely to have some savings or interest-bearing assets, but the dollar amounts available to many households may still fall short of what is needed to provide durable financial security in a high-cost economy.

Dividend income captures a different form of asset holding. Households can receive dividend income by owning stocks or mutual funds that distribute a portion of company earnings or investment returns to shareholders. Far fewer middle-income households receive dividend income than interest income, but Massachusetts stands out much more sharply on this measure. In 2024, 33 percent of middle-income households in Massachusetts reported dividend income, compared with only 20 percent nationally. And the share grew by 14 percentage points in Massachusetts from 2014 to 2024, compared with just 5 percentage points nationally.

Massachusetts ranks first among states for the share of middle-income households with dividend income. This may reflect the commonwealth’s high incomes, high educational attainment, and large professional, technology, biotech, and finance sectors, where compensation through employee stock options is common. But dividend income remains an imperfect measure of financial security; it captures only whether households receive dividend payments, not the size of their holdings in equities, and it may reflect both long-term investment and smaller-scale participation in the stock market, as fintech and low-cost retail investing platforms have expanded access to trading.

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3. Household Debt

For many households, debt functions as a second way to manage the timing mismatch between income and expenses. Like savings, credit can help families smooth cash flow, cover large or unexpected costs, and make investments that may improve long-term security, including buying a home, paying for education, or replacing a car. But unlike savings, debt creates fixed repayment obligations that can make households more vulnerable when income falls, interest rates rise, or other costs increase. For this reason, household debt is best understood as a measure of both access and exposure: access to credit that can help households build assets or manage large expenses, and exposure to repayment burdens that can reduce flexibility, increase financial stress, and make it harder to absorb shocks.

Data from the Federal Reserve Bank of New York show Massachusetts residents carry large debt loads in dollar terms. In 2024, household debt averaged about $76,400 per adult with a credit record, placing Massachusetts seventh highest among states and about $14,700 above the US average. High housing costs are the largest driver of this gap: Mortgage debt averaged about $57,600 per adult with a credit record in Massachusetts, compared with about $43,000 nationally. But the commonwealth’s elevated debt levels are not only a mortgage story. Student-loan balances were also somewhat higher than the US average, at about $6,200 per adult compared with $5,600 nationally, and credit card balances were slightly higher as well. Auto debt was the main exception: Massachusetts residents carried about $4,300 in auto debt per adult, well below the US average of about $5,700.

The state looks less exceptional when debt per capita is measured against per capita income. On this income-normalized measure, Massachusetts falls closer to the middle of the state distribution and well below other high-cost states, such as Hawaii and California. In the aggregate, Massachusetts’ relatively high income base offsets some of the burden created by its high debt levels.

Debt relative to income improved considerably from 2005 to 2024. In 2005, Massachusetts household debt per capita equaled about 170 percent of income per capita. In 2006, it spiked to 186 percent, and then began declining gradually through the 2010s and early 2020s. By 2024, it had fallen to 132 percent, the lowest level in the period shown.

However, this good news finding should be interpreted with considerable caution. Comparing total household debt with the state’s overall income base does not measure the debt burden facing the typical household. Because both income and debt are unevenly distributed, the households contributing the most to aggregate income are not necessarily the same households carrying the most financially burdensome debt. SIPP data for 2023 illustrate this unevenness: About one-third of Massachusetts households had no debt, while more than one-third owed over $100,000. The income-normalized measure may therefore understate debt pressure among lower- and middle-income households.

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4. Home Equity

Home equity is the largest source of wealth for most households, but it is difficult to measure directly by income group at the state level. Two complementary indicators can approximate changes in home equity for middle-class households in Massachusetts: statewide aggregate home equity (the total value of owner-occupied homes minus outstanding mortgage debt) and owner-occupied home value by household-income quintile. The latter measure does not net out mortgage debt, but it shows which income groups hold the state’s housing assets and how the distribution of home value by income is changing over time.

Aggregate home equity in Massachusetts has risen sharply over the past decade. After adjusting for inflation, estimated home equity — measured as the total value of owner-occupied homes minus outstanding mortgage debt — fell from about $691 billion in 2005 to a low of about $497 billion in 2013. It then increased steadily, reaching about $900 billion in 2024. This statewide measure broadly tracks the housing market cycle, with equity declining after the mid-2000s housing boom and rising rapidly as home values recovered and mortgage debt grew more slowly.

Massachusetts ranks third among states for estimated home equity per owner household, behind only Hawaii and California. In 2024, Massachusetts owner households held an estimated $511,000 in home equity, on average, well above most states and more than three times the level in lower-equity states such as Mississippi and West Virginia.

Looking now at the distribution of aggregate home value, growth was broad-based across the income distribution, with the fastest percentage gains occurring among lower- and middle-income homeowners. After adjusting for inflation, the total value of owner-occupied homes held by households in the bottom income quintile increased by about 62 percent from 2014 to 2024, followed by 58 percent in the second quintile and 52 percent in the middle quintile. Growth was slower among households in the fourth and fifth quintiles, at 44 percent and 38 percent, respectively. As a result, the middle three quintiles increased their combined share of statewide owner-occupied home value modestly, from about 51 percent in 2014 to about 53 percent in 2024.

In dollar terms, however, housing wealth remains highly concentrated. The middle quintile’s aggregate home value increased by about $74 billion over the decade, and the middle three quintiles together gained about $219 billion. But the top quintile alone gained about $134 billion and still held nearly 39 percent of all owner-occupied home value in 2024 despite representing just 20 percent of households. In other words, rising home values strengthened balance sheets for many middle-income homeowners, but they did not fundamentally alter the concentration of housing assets at the top of the income distribution.

Growth in homes values at the lower end of the income distribution are consistent with reports of increased competition for a limited supply of entry-level homes. Recent analysis finds that entry-level home affordability deteriorated sharply in Massachusetts between 2021 and 2025, while Freddie Mac has documented a long-term national decline in the share of new construction that are entry-level for-sale homes.⁶

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5. Personal Bankruptcies

Personal bankruptcy filings capture the most severe forms of household financial insecurity. When these events rise, they provide a clear signal that financial stress has moved beyond day-to-day strain.

Bankruptcy filings are below average by historical standards, but they have begun to rise from pandemic-era lows. In Massachusetts, non-business bankruptcy filings fell sharply after the Great Recession and declined even further during the pandemic. By 2022, the state’s filing rate was only about one-fifth of its 2007 level. Since then, filings have edged upward, reaching about 40 percent of the 2007 level in 2025. The same pattern is visible nationally, though Massachusetts has remained below the US trend throughout the period.

This uptick is consistent with other evidence of renewed pressure on household budgets. As the cost of maintaining a middle-class standard of living has grown faster than wages, and as the share of households able to meet that standard has narrowed slightly, more households may be approaching the point where debt becomes difficult to manage. Still, filings remain far below the levels seen during and after the Great Recession.

Massachusetts residents are also less likely than residents of most other states to file for bankruptcy. In 2025, Massachusetts had the fifth-lowest rate of non-business bankruptcy filings among US states.

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6. Retirement Savings

The ultimate test of financial security is not only whether households can manage short-term shocks, but whether they can build enough resources to maintain financial security later in life. On this measure, Massachusetts appears relatively strong. In 2023, the median value of retirement accounts among Massachusetts households with retirement savings was about $150,000, compared with $82,000 nationally according to the SIPP. Even after adjusting retirement balances for the estimated cost of maintaining a middle-class lifestyle for a single adult age 65 or older, Massachusetts ranked near the top nationally in 2023.

Using the official Consumer Price Index to adjust for inflation, the median Massachusetts balance increased modestly from about $138,000 in 2018 to about $154,000 in 2023. But when measured against the cost of maintaining a middle-class lifestyle in retirement, the relative value of these savings was essentially unchanged: The median balance equaled about 2.6 years of that annual cost in both 2018 and 2023.

This suggests that households with retirement savings in Massachusetts are relatively well positioned compared with their peers in most other states. But more information is needed to assess retirement adequacy directly. These figures do not show whether older households in particular have enough saved, and they exclude households with no retirement accounts at all.

Taken together, the indicators in this section point to a state with comparatively strong household balance sheets, but also vulnerabilities that could become more visible in a weaker economy. Massachusetts households have translated high incomes into substantial financial assets, comparatively high rates of savings and investment income, relatively strong retirement balances, and relatively low rates of severe financial failure. At the same time, they are operating in a high-cost environment with increasingly volatile incomes, large debt balances, and wealth gains that depend heavily on homeownership. This makes the commonwealth financially resilient in good times, but more exposed if conditions deteriorate. If incomes weaken, home values soften, or borrowing costs remain elevated, the same debt and housing structures that have helped many households build middle-class security could become sources of financial strain.

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