The answer to the question of whether the rich save more than less affluent households can shed light on the root causes of inequalities in wealth and economic well-being across households, indicating whether it emerges primarily from differences in lifetime earnings across households, or whether a higher rate of saving or investing plays a larger role. The answer also has direct application to optimal tax theory, specifically whether capital gains should be taxed. This paper’s results suggest that recent studies’ conclusions that higher rates of saving among rich households are exclusively due to accumulated capital gains may be overstated.

The question of whether affluent households save at a higher rate than other parts of the distribution has been asked by economists on numerous occasions since the 1950s. It is standard in this research to define affluent, or “rich,” households as those with high lifetime earnings or income to better ground the empirical question in relevant theory. However, results in the literature are mixed regarding whether rich households in fact save more than others, with some studies suggesting a generally flat saving-rate profile across the distribution and others supporting the notion that the rich do indeed save more. Many empirical papers do not include direct measures of lifetime earnings, relying instead on proxies. Additionally, few include the full range of assets that low- and middle-income households depend on to finance their retirement, and even fewer use data that include sufficient samples of households that are in the extreme upper tails of the wealth or income distribution. 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, to explore wealth-to-lifetime-earnings ratios—the cumulative impact of saving over time—across the lifetime earnings distribution. In addition, we use an expanded measure of wealth that includes the asset value of defined benefit pensions and Social Security, the public pension program. We find a steep gradient of saving when defining rich households by their lifetime earnings, which crucially includes business income in household earnings. The steepness, though, does not manifest until the top deciles of lifetime earnings. Recent research draws 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.