Average net worth of Americans -- this is a joke, right?

[TopHatFox]

http://www.moneyrelationship.com/retire ... you-stand/

Similar articles are about the same. These figures seem really low. I suppose our method is extreme if you're able to save more than 8k after 10 years of working...awell, different people focus on different things than wealth (I'm not sure whether the choice of other factors over wealth is 100% deliberate, though).

What do you think about what I think is a ridiculously low average net worth? (compared to potential net worth with even a modest increase in savings rate)

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It is ironic that post 65+, the average networth according to this link ends up being 225k, or one solid Jacob @ ~9k at 4% a year.

[Dragline]

No surprises there. If you are surprised, you give your fellow beings too much credit for being able to use conscious reasoning to plan a decent future for themselves. Most people use their conscious reasoning powers to find justifications for the knee-jerk decisions they have already made. Think of it as a mental papering over.

This is why there is so much cognitive dissonance around this topic -- people do not like to admit that they have made and continue to make bad choices.

[Ydobon]

Big mortgages and too much credit I suspect. I'm not really ERE material, probably lucky to be ER at some point and even I manage to have something like 15x the average American of my age.

[cmonkey]

Building net worth the way folks do here requires thinking in an entirely different way that most folks just don't or can't do. Thinking of money in terms of 'what can this stuff do for me' instead of 'what can I do with this stuff' and also thinking past the weekend. We're talking apples and oranges.

It does feel great knowing I've reached senior citizen financial levels yet I have the body of a 20 something. Old soul in a young body....

[workathome]

I was surprised it wasn't negative, after factoring student loans, mortgage, etc.

[IlliniDave]

The Statistical Abstract of the United States has a lot of data of this nature available online. At a glance, this data seems reasonably consistent with what the Census Bureau has put together. I couldn't tell from a quick glance at the article whether the figures (I think they were possibly medians, not averages) were for households or individuals.

I do not like to look at this type of data because it makes me uncomfortable. My net worth is far enough above that of my age cohort (and people of normal retirement ages for that matter) that I find it a bit embarrassing to be reaching for a little more before pulling the plug myself.

[GandK]

It is ironic that post 65+, the average networth according to this link ends up being 225k, or one solid Jacob @ ~9k at 4% a year.

Well, yes... but most of those people are drawing Social Security and/or a pension, which removes the need for either a job or a high net worth in order to produce an income. So the $225k is less likely to be used for daily expenses. That generation didn't have a DIY retirement situation like we do.

Yes, overall it's ridiculously low, I agree. And if we start separating that data out by race and gender, it gets even crazier. I've seen multiple studies that say that across the board, in the US, men have more saved than women, and white and Asian people have more saved than black, Hispanic, and Native Americans do. By huge percentages. And this is before we even wade into the topic of different life spans and different levels of annual spending among all these people.

Net worth is such a limited view of financial accomplishment, though.

[arrrrgon]

I've never liked the idea of including your home in any calculation. Whether I own 3% or 100% it's not something I have any interest in selling. Without including pensions/SS in the number you're really just using skewed data. As we all know a $3000/mo pension figured over 30 years is $1,000,000. I guess it's hard to come up with a tangible number when you're guessing at lifespan though.

[jacob]

I think the way to calculate NW depends a lot on which factors are relevant to said net worth, specially social structure, traditions, etc.

Take Denmark, for example. The taxes are high (it's harder to save), the social safety net is superstrong (there's less need to save), there's practically no investment culture to speak off (it's tough to grow), there's a tall poppy culture (you don't really want to save), and the IRA equivalent is somewhat rare (and very restricted), the average (the average and medians are practically the same in that country) net worth for a family/consumer-unit is around $150k. However, most of that money is "invested in bricks". Renting (other than short-term apartments) is kinda rare. (Good luck trying to find a house to rent.) I'm quite amused that I would actually be a 1%'er if I relocated ... whereas in the US, I'm far from that---well, not as far as the median, but you know what I mean.

My point is that Americans apparently manage to live quite fine despite low net-worths. Americans have the world's easiest access to consumer credit. It's not that difficult to relocate or begin work in other careers (unlike many other countries). Maybe this is why the average net-worth isn't that high. Because it doesn't really need to be.

[George the original one]

Debt is a killer for net worth when it's not being used to generate income. My sister, for instance, has negative net worth even though she now owns an RV for her residence. She is totally dependent on a very low social security payment, food stamps, & medicare.

[C40]

I recently saw data showing average and median net worths for different income levels and ages. That was more interesting. There are so many people with very low incomes and zero net worth that it skews the data in the link ppsted.

( Sorry, I don't remember where I saw it and I'm on mobile now so i don't want to search for it )

[bad_LNIP]

Interesting conversation I had with one of my buddies a few months back is relevant to this...

So my buddy is in Cali working for a large Tech company that is paying over 150k total comp, including a 50k cash bonus paid in monthly installments.

He calls me with great news that he's getting promoted. Total comp is now pushing 170k...but he might need to borrow 5k to cover his relocation expenses just until he gets his reimbursement check in from the company.

So....I decided to have a heart to heart with him or more of a WTF are you doing talk...and he is a graduate degree holder, non-stupid person, but he does really self-destructive, stupid stuff.

He justifies living in a high cost area so his kids can go to the best schools. To him the only alternative is private school and living in a lower cost area, which comes out to the same but with the better school district option he can stay in a nicer house. That's his reasoning. Nevermind the fact that his wife doesn't work and used to be a school teacher!!! He could home school his kids with a formerly certified teacher!

He claims he spends 1200/month on food because he wants to eat organic and healthy...but then he has had a 12+ year tobacco dip habit...

He has made from 90k to 170k over the past 10 years and is ALWAYS broke. Both he and his wife are spenders, so in that regard the get along, but as far as retirement, college savings, etc... he has zip. He has always made more money than me, but never has had more money than me in savings/assets.

This is why there is so much cognitive dissonance around this topic -- people do not like to admit that they have made and continue to make bad choices.

This is the truth. Even though my buddy kinda acknowledges that he isn't making the best decisions financially, it makes him feel good, and that is enough apparently for him. I talk about retirement and he comes back with how he doesn't think he's going to live past his mid 50's (we are in our mid 30's now)

[Sclass]

No surprises there. If you are surprised, you give your fellow beings too much credit

My problem exactly. I think all the people I know IRL are doing great because they look great and I know they're smart.

As I get better glimpses into their lives I can see their situation is bad. All that fooling around has a way of catching up with you after thirty years.

Reality is sad.

[leeholsen]

http://www.moneyrelationship.com/retire ... you-stand/

What do you think about what I think is a ridiculously low average net worth? (compared to potential net worth with even a modest increase in savings rate)

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It is ironic that post 65+, the average networth according to this link ends up being 225k, or one solid Jacob @ ~9k at 4% a year.

This is actually not a joke but a sad truth.

In fact it's even worse than that. Although not every article is accurate, there are many articles that have come out over the past year or more that show that a good number of people do not have over $3,000 of positive net worth and I would bet if you ask any working people you know what percent they save for retirement from their paycheck; most that will tell you would say nothing and less than 10% would save over 5%.

Most people just do not plan and save ahead of their next vacation and I would suspect that people that save like the people here would be one tenth of 1%.

I'm currently looking at selling my current jeep and buying an older one when I can find one with low mileage so I could pocket some money by selling a car that I bought before I committed to being a minimalist and save about 20% of depreciation costs and bring my depreciation to over 90%. I would think I'm probably the only guy in the country doing this that doesn't have to because he needed the money.

[Ydobon]

I had to Google tobacco dip!

[IlliniDave]

One thing to keep in mind is Americans are generally income-oriented and think in monthly increments. I guess it's a consequence of our tax structure which hits hardest on income, and the convention of monthly billing for most things. Building wealth is generally an exercise in thinking in terms of years or even decades. Some people even think on generation time scales.

My parents are a good example of the 65+ group. Whatever net worth they have (I'd guess between $100K and $200K) is illiquid as it's mostly in their home and some land. Fortunately their debt, if any, is small and inconsequential. They probably don't live month-to-month but aren't far from it. They only get token SS but my dad has a state university system pension that he paid into for his entire teaching career, which meets their needs. So with their cash flow being adequate they simply don't fret over their net worth. They probably couldn't even state accurately what it is.

While the family was young we were lower tier of middle class socioeconomically. Sure, they could have been more conscious about building financial assets, but I can say that while raising 4 kids they were more frugal than "normal" for the time, and normal by 60s and 70s standards is probably quite frugal by today's. Lower middle class then would be considered half-destitute today. They loosened up and enjoyed life a little once all us kids were grown, and have been generous to family members fallen on hard times. They are Kennedy Democrats to the core and truly believe the government is benign and have faith that the programs they dutifully paid into will keep their promises. So to them amassing wealth made no sense because they didn't desire to live like rich people do. They find a certain nobility in not being wealthy. In their politics rich=evil, end of discussion. If they knew my net worth relative to my "peers" as laid out in the subject article, they would have a dilemma but in the end might expel me from the family! My mom's sister, who's net worth is several multiples of mine, would be gone in a heartbeat.

[ether]

Most people have no idea how to invest money. Mention the stock market and most people's eyes glaze over. What good is saving money if you don't know what to do with it?

[7Wannabe5]

What would be the expected return on an index fund and/or pork bellies in a world of the future in which the US Government was no longer issuing minimum Social Security payments equivalent to Jacob's current expenses?

[steveo73]

My parents are a good example of the 65+ group. Whatever net worth they have (I'd guess between $100K and $200K) is illiquid as it's mostly in their home and some land. Fortunately their debt, if any, is small and inconsequential. They probably don't live month-to-month but aren't far from it. They only get token SS but my dad has a state university system pension that he paid into for his entire teaching career, which meets their needs. So with their cash flow being adequate they simply don't fret over their net worth. They probably couldn't even state accurately what it is.

I think that this is why sometimes these figures overstate how bad the problem is. If you have a decent pension then your net worth probably doesn't matter that much.

What would be interesting is if we saw those figures -i.e. net worth or home ownership + pension worth or if in another 20 years or so we look at the figures again when pensions are on the way out.

Still I think in general lots of people just don't save even for a traditional retirement. In Australia we have compulsory superannuation. Basically jobs pay 10% of the salary you earn into super which you are not meant to touch until you are 60. If this doesn't happen I don't think people save money. The average person just views money as income with which you buy stuff. They don't realize that you can buy intangibles like not having to work or financial security.

[Ydobon]

@steveo - I take it you mean when *unfunded* pensions are on the way out? In the UK, anyway, funded pensions (i.e. defined contribution pots invested in stocks and shares) have risen sharply because of auto enrollment by the government.