(Bloomberg) — Five years after the recession ended, many Americans still teeter on the financial brink, barely prepared to handle an emergency expense and aging toward retirements they haven’t saved for, a Federal Reserve report shows.

About 47 percent of 5,896 respondents in the Fed’s 2014 household survey, taken last October and November, wouldn’t be able to cover an emergency $400 expense without selling something or borrowing money.

While that marks an improvement from 52 percent last year, the report states that it shows many Americans to be “ill-prepared for a financial disruption.”

The survey paints an image of fragile households, seemingly at odds with climbing consumer confidence and a healing economy. The findings demonstrate that the hangover from the financial crisis and downturn of 2007 to 2009 still weighs heavily on family balance sheets.

“We are failing as an economy if we have a huge swath of American households who can’t come up with $400,” said Josh Bivens, research and policy director at the Economic Policy Institute in Washington. “The really dire financial situations” of many survey respondents can be largely attributed to “the fact that we’re still far from fully recovered from the Great Recession.”

The report comes two weeks before Fed officials meet to continue the debate over when the economy will be healthy enough for the first interest-rate increase since 2006.

On the whole, the report’s authors say Americans are better off than they were a year earlier, pointing to a 3 percentage-point gain in the share of respondents who said their families are “doing okay” or “living comfortably.”

For most households, that represents “only mild improvements in their overall well-being,” the report’s authors say.

Long-term problems persist. About 31 percent of non-retirees have no retirement savings or pension, according to the report, including one-quarter of people over the age of 45.

About 28 percent of people who plan to retire and gave an expected retirement age said they will work to age 70 or later.

In a sign that underemployment persists in the economy, the survey found that 36 percent of working respondents who aren’t self-employed said they’d prefer to work more hours at their current wage. Among those who work part time, the share is even higher at 49 percent.

Medical expenses

Underemployment and lack of preparation for emergency or retirement expenses aren’t the sole signs of economic vulnerability in the report: Nearly a third of respondents had to forgo some medical treatment in the past year because they couldn’t afford it, for instance. One-sixth of people were denied credit, offered less credit than they wanted or didn’t apply for credit for fear of being denied.

“The findings in this survey highlight that economic challenges remain for a significant portion of the population,” the report states. “Although the U.S. economy is recovering from the Great Recession and most individuals appear to be generally stable financially, there are clearly segments of the population who are still struggling on one or more dimensions.”

Underwater mortgages

In one especially clear sign of the downturn’s scarring, 14 percent of mortgage holders reported owing more than what their home is worth. People in the West were most likely to be underwater on their mortgages, at 17 percent, while people in the Northeast were least likely, at 11 percent.

What’s more, renters who wanted to own were encountering financial barriers that prevented them from buying. Some 81 percent of renters indicate that they would prefer to own their home if they could afford to buy one, yet 50 percent can’t afford a down payment and 31 percent said they couldn’t qualify for a mortgage.

“The survey results highlight the need to continue to monitor” populations that could experience economic hardship if they came across financial or economic disruption, the report states, and to “assess the extent to which they are, or are not, benefiting from broader economic recovery.”

--With assistance from Victoria Stilwell in Washington.

Instant Insights /

Financial vulnerability haunts families after crisis

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