Here is the median net worth and retirement savings among US households by age | The motley fool

How does your net worth and retirement account balance compare to the average American household?

The Federal Reserve’s Survey of Consumer Finances (SCF) is published every three years. The report is a financial snapshot of American households across demographic and economic groups, providing details on income, assets, debt and net worth.

The last SCF was conducted in 2022 and released in October 2023. US households reported a median retirement account balance of $333,940 and a median net worth of $1.06 million. Read on to see a breakdown of those numbers based on age.

A person throwing a coin into a piggy bank, next to which is a growing stack of coins and an alarm clock.

Image source: Getty Images.

Average Retirement Account Balance by Age

Retirement savings are measured as the cumulative balance in individual retirement accounts (IRAs), Keogh accounts, and employer-sponsored accounts such as 401(k) plans, 403(b) plans, and thrift savings plans. Importantly, it does not include investments held in individual brokerage accounts.

The chart below shows the average retirement account balance among American households based on the age of the reference person, defined as the male in mixed-sex couples and the older person in same-sex couples.

Age group

Average retirement savings

18-34

$49,130

35-44

141 520 dollars

45-54

$313,220

55-64

$537,560

65-74

$609,230

75+

$462,410

All Families

$333,940

Data source: Federal Reserve 2022 Survey of Consumer Finances.

Average net worth by age

Net worth is equal to assets (financial and non-financial) minus debt obligations. The most common financial assets reported by US households in the 2022 SCF were bank accounts (98.6%), retirement accounts (54.3%), and brokerage accounts (21%). The most common non-financial assets were vehicles (86.6%) and primary residences (66.1%).

Over three-quarters of American households reported some type of debt, with an average debt burden of $163,800. The most common sources of debt were credit cards (45.2%), car loans (34.7%) and education loans (21.8%).

The chart below shows the median net worth among American households based on the age of the reference person.

Age group

Average net worth

18-34

$183,380

35-44

$548,070

45-54

$971,270

55-64

1.56 million dollars

65-74

1.78 million dollars

75+

1.62 million dollars

All Families

1.06 million dollars

Data source: Federal Reserve 2022 Survey of Consumer Finances.

Average retirement account balance and net worth by age

Averages can be misleading when working with asymmetric data, meaning data that does not follow an even distribution. Net worth and retirement savings are good examples of asymmetric data because wealth is not evenly distributed across the US population. According to the Federal Reserve Bank of St. Louis.

In this case, skewed data biases the mean higher because a small portion of the population is very rich. For this purpose, the average (middle) value is a better reference point. By definition, 50% of the data points are greater than the mean and 50% of the data points are less than the mean.

The chart below shows the average retirement account balance and median net worth among American households based on the age of the reference person.

Age group

Average retirement savings

Average net worth

18-34

18880 dollars

$39,040

35-44

$45,000

$135,300

45-54

$115,000

$246,700

55-64

$185,000

$364,270

65-74

200,000 dollars

$410,000

75+

$130,000

$334,700

All Families

$87,000

$192,700

Data source: Federal Reserve 2022 Survey of Consumer Finances.

As shown above, the average American household reported a retirement account balance of $87,000 and a net worth of $192,700 in SCF 2022. This means that half of American households reported larger retirement account balances and more wealth, and half of American households reported smaller retirement account balances and less wealth.

These statistics may bring feelings of dissatisfaction or even embarrassment to some readers. But anyone can improve their financial situation with the right attitude and guidance. The first step is to build a budget. Financial planners often recommend the 50-30-20 framework, as explained below.

  • Necessary expenses: 50% of income should be allocated to necessary expenses such as groceries, gas, rent and utilities. This category also includes minimum debt payments.
  • Discretionary expenses: 30% of income should be allocated to discretionary spending such as travel, entertainment and luxury purchases.
  • Savings: 20% of income must be saved for retirement through individual accounts, employer-sponsored accounts, or some combination of the two. Debt payments above the minimum also belong to this category.

Typically, it’s best to pay off high-interest debt before investing additional dollars in brokerage or retirement accounts. The definition of high interest debt ranges from 6% to 8%, but ultimately it depends on what your investments will earn. Of course, nobody knows the future, so estimate it very conservatively. You want to avoid a situation in which the debt is compounding faster than the dollars invested.

Once high-interest debt is paid off — a good example is credit card debt — financial planners typically advise paying off other debt gradually while saving for retirement. A common recommendation is to ensure that contributions to employer-sponsored plans are sufficient to earn the company’s full match. Not all employers offer similar contributions, but those that do are essentially offering free money.

Beyond that, I think additional savings should be invested through an IRA or personal brokerage account, simply because they offer more flexibility. Anyone who isn’t sure where to start should consider a tracking index fund S&P 500, a benchmark for the overall US stock market. What’s more, with interest rates at their highest level in decades, now is a good time to transfer money to a high-yield savings account.

#median #net #worth #retirement #savings #among #households #age #motley #fool
Image Source : www.fool.com

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top