“In “The Wealthy-Hand-to-Mouth,” authors Greg Kaplan of Princeton University, Giovanni Violante of New York University and Justin Weidner of Princeton University find that both the wealthy hand-to-mouth (those with little or no liquid wealth but substantial holdings of illiquid assets – those that carry a transaction cost to access, such as housing, large durables, or retirement accounts, as opposed to liquid cash, checking, and saving accounts), and the “poor-hand-to-mouth” behave similarly: both groups have “large marginal propensities to consume out of small income changes – a key determinant of the macroeconomic effects of fiscal policy,” they write. The wealthy-hand-to-mouth choose to weather income fluctuations rather than dipping into their assets to smooth shocks , because smoothing shocks would entail holding large balances of cash and foregoing the high return on their illiquid assets. The research shows that around one-third of all US households live hand-to-mouth (around 38 million households in 2010, based on 117 million households in 2010, Census Bureau), and of that group, over two-thirds are indeed wealthy-hand-to-mouth. While poor-hand-to-mouth households are most frequently young with low incomes, the wealthy-hand-to-mouth are older (peaking around age 40), have high incomes (similar to the non-hand-to-mouth) and hold substantial illiquid assets (at age 40, around $50,000 on average). In addition, wealthy-hand-to-mouth households hold portfolios that are very similar to the non-hand-to-mouth in terms of their shares of illiquid wealth held in housing and retirement accounts. Unlike the poor hand-to-mouth who tend to stay in this state for long periods of time, wealthy-hand-to-mouth status is transient, lasting an average of only 2.5 years…”