Understanding Median Net Worth in America

A long time ago a junior high math teacher introduced me to the concept of the median. At the time I did not appreciate the value of that information. It seemed an average was more useful. However, the problem with an average is that it can become very misleading depending on the numbers involved. For example, if there are several really big numbers and then a host of significantly smaller numbers, the larger values can make the average so much larger and better.

The median, by way of contrast, shows what the midpoint value is of a large set of numbers, regardless of the outlandish size of the top ten percent of the values in the entire range. Many otherwise wealthy citizens of the United States are really quite poor and fall below the net worth median. Said another way, 50% of the potential retirees (2019-2020 data) have not saved enough for retirement. Some of this is age-related, but I have seen far too many people in their 60’s below the median net worth number. Are you one of them? Are you over 50 years old? If so, you probably need to make some changes in your saving and spending habits.

Average Net Worth of the American Family

In 2019, the U.S. Federal Reserve said that the average net worth of the family was \$748,800. This sounds wonderful until you find out the median net worth for that same year. The median is \$121,760. This means more than 65 million households have saved less than \$150,000 in total. Remember, net worth can include possessions, not just retirement accounts or savings. Obviously, some families are just starting to save, so it isn’t surprising that many might have a net worth less than \$25,000. But given the aging population, the median should be much higher.

According to the U.S. Census Bureau, 333 million people live in the United States in 2022. There are 131 million households. 36% of the population is over the age of 50. About half of the population is under the age of 40. In 2021, the median age of the population of the United States was 38.8 years. While this may seem quite young, the median age in 1960 was even younger, at 29.5 years. Because this includes children, a median age approaching 40 is a scary number.

Median Net Worth By Age

If you are over 55, and your net worth is \$250,000, including the value of your home, then there is something wrong with either your savings plan or your spending. Of course, there are always exceptions due to health issues and unexpected divorces or other family disasters. If you depend on Social Security, be sure to understand the problems facing that government program before you think it will meet your needs. If you enter retirement with \$250,000 in your retirement account, and no pension, then don’t expect more than about \$10,000 in annual income from your investments.

Social Security Recipients Must Beware

According to the Social Security Administration, “Approximately 70 million Americans will see a 8.7% increase in their Social Security benefits and Supplemental Security Income (SSI) payments in 2023.” If the population is 333 million, then 21% of the population is on Social Security. But it gets worse. In 2021, the civilian labor force of the United States numbered about 161 million people. Therefore, there are about 230 million adults if we combine the Social Security recipients and the civilian labor force. This means there are about three people working for every one on Social Security. This is not sustainable.

Some Tips for Growing Net Worth

Investing is the key. It isn’t so much how much your income is as what you do with your income. Invest early as an adult and consistently each month. Saving is a good idea, but saving will not grow your net worth. The best and proven way to build true long-term wealth and higher net worth is to invest in the stock market.

Take prudent risks. Many people don’t take enough risk. That was true of me when I was in my 30’s and 40’s. Like me, many are overly conservative with their retirement investment allocations, with far too much money in cash and bonds. Will there be down years and bear markets? Yes, there will. But don’t let the speedbumps keep you from the investing highway.

Take the Free Money. Take advantage of your company match in your 401(k) or 403(b), if available. Because traditional 401(k) contributions are pretax, they’re a great way to save your money and build wealth over time. If you can afford more that just enough to get the full match, open your own ROTH IRA account and deposit additional savings there. Of course, you should invest in the stock market.

Do Not Spend Your Salary Increases. Everything becomes more affordable when you get a raise. One thing that doesn’t get more affordable is retirement. Inflation will make each dollar strain to be useful when you reach retirement. Wise adults continue the same lifestyle before a raise, when possible, so as to save and give more during their working years.

Aim for Gross Worth, not Net Worth. Limit borrowing and tackle debt payments today. Debt is always easier to get than it is to eliminate. Every dollar spent on interest payments is one less dollar available for investing, saving, and giving. In other words, get off of the net worth train and ride the gross worth train instead. Stop living above your means.

Your goal in retirement should be no mortgage and no consumer debt. You should not have to calculate net worth in retirement. Rather, add up your assets and see your gross worth. But even better yet, let me encourage you to have Jesus rather than silver or gold.

I’d Rather Have Jesus by Oscar C. A. Bernadotte

Here is wise living:

I’d rather have Jesus than silver or gold;

I’d rather be His than have riches untold;

I’d rather have Jesus than houses or lands;

I’d rather be led by His nail-pierced hand

Refrain:

Than to be the king of a vast domain

Or be held in sin’s dread sway;

I’d rather have Jesus than anything

This world affords today.

I’d rather have Jesus than men’s applause;

I’d rather be faithful to His dear cause;

I’d rather have Jesus than worldwide fame;

I’d rather be true to His holy name

He’s fairer than lilies of rarest bloom;

He’s sweeter than honey from out the comb;

He’s all that my hungering spirit needs;

I’d rather have Jesus and let Him lead

Average Net Worth By Age