Net Worth... average median mean

[imoldernu]

I'm sure this has been covered many times on this forum, but maybe it's time for an update.

This link estimates Net Worth in the United States... By AGE

https://turbo.intuit.com/blog/real-money-talk/net-worth-by-age-704/

So much of our looking ahead and financial planning is based on dollars, that it's important understand numbers in terms of how they are calculated. So... you MUST understand the difference between average, median and mean.

From another website.

The mean net worth is the average net worth; the net worths of a group averaged into one. The median net worth is the value that is right in the middle of all of those numbers. Median net worth is arguably the one that gives you the more realistic view of an age group's financial situation. If you were to average the net worth of every millennial in the U.S., you'd have to include that of Facebook founder Mark Zuckerberg, age, who is currently worth $61.5 billion. That's probably going to skew the numbers higher for a 29-year-old struggling to make his next student loan payment.".

so:According to the Federal Reserve, the average net worth for Americans between the ages of 55 and 64 is $1,167,400, while the median is at $187,300.

Of course that's just the beginning. Many articles that we read every day, not only mix mean and median, but completely ignore or do not differentiate between an individual, a married couple, or a household.

 

[imoldernu]

And to add a little more in government statistics to add that other variable that generates a lot of discussion here...

Separating net worth including and excluding the home ownership.

https://dqydj.com/net-worth-by-age-calculator-united-states/

 

[gauss]

Yep - those statistical summary metrics all have different values when you get away from a 'gauss'ian normal bell curve distribution (or any symmetric distribution I believe).

-gauss

 

[MI-Roger]

Frightening that half of the pre-retirement group has under $187K of net worth (including their home), when it will require $1M to generate a $40K annual retirement income with a 4% withdrawal rate.

 

[Al18]

At the end of the article, the author states "By the time you’re of retirement age, your goal is go have 80% of your current salary saved for every year after you retire."


I strongly disagree with this statement, as do many users of this forum who have been living on 50% of their salary for many years and have been investing the rest. I was able to safely retire at this 50% spending level.

 

[Badger]

I understand the difference between mean and median but math is not my strong suit and my only basis statistics class was almost 50 yrs ago. Some memories are a little bit of a struggle. If you have a curve for the median with the midpoint at $187,300 what does the curve look like on either side of the midpoint? It doesn't seem like it would be a bell shaped curve. For example what if a large number of the left side of the median curve are under $25k? Wouldn't the curve look like a roller coaster or be skewed to one side of the median point depending on the labeling of the X and Y axis?


Cheers!

 

[Red Badger]

At the end of the article, the author states "By the time you’re of retirement age, your goal is go have 80% of your current salary saved for every year after you retire."


I strongly disagree with this statement, as do many users of this forum who have been living on 50% of their salary for many years and have been investing the rest. I was able to safely retire at this 50% spending level.

+1.

I drank that 80% (and similar ilk) Kool Aid until I wised up through this forum and others. And yup, after deductibles, insurance, salary level (higher income) taxes, we were living on ~50% of gross income (and keeping 10% of that in cash). Once I tested that (a hundred times) in FireCalc, Fido, etc, I knew we were "there."

Been Retired 18 months, and only the dog is eating cat food. Seriously, cat food is his favorite treat.

 

[Andre1969]

+1.

I drank that 80% (and similar ilk) Kool Aid until I wised up through this forum and others. And yup, after deductibles, insurance, salary level (higher income) taxes, we were living on ~50% of gross income (and keeping 10% of that in cash). Once I tested that (a hundred times) in FireCalc, Fido, etc, I knew we were "there."

Been Retired 18 months, and only the dog is eating cat food. Seriously, cat food is his favorite treat.

On the flip side though, sometimes I wish more people would at least take a sip of that Kool Aid, to motivate them at least. Right now I have a friend living with me who's fallen on hard times. He had a good job doing coding/engineering or something like that, but got burned out and quit. And then, he had to move out of the place he was staying, so I've been letting him crash here until he can find a job. He's 27.

Well, the other day I mentioned an article on Alexandria Ocasio-Cortez, talking about her current net worth in relation to where it "should" be, according to various metrics for her age group. I brought up how people were commenting on it, and attacking the metric, saying it was impossible to meet. I forget what, exactly it was, but one of those things that said you should have XX% of your salary saved by a certain age.

Anyway, I was trying to bring up the point that too many people were attacking the metric itself, saying it's unrealistic and they shouldn't be held to it; however, just because it's hard to reach, doesn't mean it's necessarily unrealistic. It's not that it's unrealistic, but it's hard to attain. And, quite possibly, even harder for today's generation. But, just because something's hard to attain, doesn't mean you can just change the requirements to get there. It's hard to get to the moon. However, you have to do certain things to get there...you can't simply change that to make it easier to achieve that.

But, my friend pretty much just jumped on the bandwagon of yeah, it's unfair, you can't hold people to that metric, because it was something invented for "my" generation, things were "different" in my day, blah-blah-blah. So, I didn't push the conversation any further.

Oh, this guy also has great faith in BitCoin and other crypto-currencies. I just bite my tongue on that one...

 

[Nick12]

Frightening that half of the pre-retirement group has under $187K of net worth (including their home), when it will require $1M to generate a $40K annual retirement income with a 4% withdrawal rate.

If most of the U.S. population saves and invests and lives below their means to create tremendous amount of net worth and retire early the entire USA economy would collapse.

 

[Mdlerth]

Preachers must preach all the time to keep the flock pointed in the right direction

Nothing new in the article, but I don't fault it for that. Pretty much the standard advice of spend less, save more, avoid debt, invest early and often, etc. We've all seen it a thousand times, but I'll be the first to admit that it took seeing about 900 times before it sunk in enough to affect my actions. I was 42 with life savings equal to approximately six Beanie Babies (they'll be worth a fortune someday!) and half a jar of mustard before getting serious about building a retirement kitty. Maybe it needs to be repeated constantly before it penetrates skulls as thick as mine.

Frightening that half of the pre-retirement group has under $187K of net worth (including their home), when it will require $1M to generate a $40K annual retirement income with a 4% withdrawal rate.

I suppose that's why so many folks tap their SS as soon as they can.

Well, the other day I mentioned an article on Alexandria Ocasio-Cortez, talking about her current net worth in relation to where it "should" be, according to various metrics for her age group. I brought up how people were commenting on it, and attacking the metric, saying it was impossible to meet.

Perhaps being elected to Congress will improve her chances of catching up to where it "should" be. I hear it's a good job if one can get it.

 

[Dtail]

+1.

I drank that 80% (and similar ilk) Kool Aid until I wised up through this forum and others. And yup, after deductibles, insurance, salary level (higher income) taxes, we were living on ~50% of gross income (and keeping 10% of that in cash). Once I tested that (a hundred times) in FireCalc, Fido, etc, I knew we were "there."

Been Retired 18 months, and only the dog is eating cat food. Seriously, cat food is his favorite treat.

From another angle, it also does not take into account that some folks like myself who earned a high compensation realized we couldn't retire in a HCOL area. Thus we reduced expenses by quite a bit and our retirement budget is ~20% of the final year compensation i.e. % of earnings had no real relevance.

 

[Nick12]

Nothing new in the article, but I don't fault it for that. Pretty much the standard advice of spend less, save more, avoid debt, invest early and often, etc. We've all seen it a thousand times, but I'll be the first to admit that it took seeing about 900 times before it sunk in enough to affect my actions. I was 42 with life savings equal to approximately six Beanie Babies (they'll be worth a fortune someday!) and half a jar of mustard before getting serious about building a retirement kitty. Maybe it needs to be repeated constantly before it penetrates skulls as thick as mine.



I suppose that's why so many folks tap their SS as soon as they can.



Perhaps being elected to Congress will improve her chances of catching up to where it "should" be. I hear it's a good job if one can get it.

Alexandria Ocasio really moved up in the world. She was a waitress earning minimum age plus tips to now a congresswoman making $174k a year. Living in Fairfax or Alexandria VA might get you a 1-2 bedroom condo.

 

[ckelly78z]

Evidently the multiple billionaires in America more than make up for the loads, and loads of people who don't have 2 nickels to rub together. Working in a factory environment in NW Ohio, I can tell you that my $500,000 net worth is an anomaly amoungst my peers. They seem to have no direction in life other than what feels good for the moment with no thoughts towards the future. Renting houses, divorces, and new cars/Harleys/boats are what drives these people.

These workers at least have jobs, what about all the inner city government subsidy folks that live off the government teet, and have no future plans ?

 

[Rianne]

It's interesting so many highly compensated are deep in debt when they don't have to be. It's a matter of taking a realistic lifestyle of needs vs wants. And of course, where you live in the country. DF sons, both work in IT and live in San Diego. Salary $200K is pittance in relation to COL. One shares a small apartment to try to save and it's still hard.

 

[Nick12]

Creating and accumulating net worth takes a lot of sacrifice, living below your means, staying out of debt and investing in mutual stock index funds every month regardless of share price. Some of the people I know that have varying sources of annual incomes also don't have a clue to create and grow wealth but the accumulate many toys in their lives . In regards to inner city govt subsidy I would have to add this applies to the blue collar crowd that lives beyond the inner city and also lives off our govt social programs that qualify to receive aid. I asked an old friend who lives out in the country ( not inner city) why doesn't he apply for a promotion at work to earn more income. He replied if he makes more $$ he would no longer be eligible for govt aid. The fleecing of America.

 

[Rianne]

We choose to keep our MAGI so we can afford HI through the ACA. In so many ways, a higher income does not justify the services some people need. Daycare for a couple of kids can easily cost 30K/year. Is it worth it to work? And if that 30K job does not offer HI, what choice do you have to not go on ACA. And if the job offers HI, it's usually terrible and expensive. Even if you make $60-70-80K and $30K goes to daycare.

This is complicated for the middle class.

 

[38Chevy454]

I... you MUST understand the difference between average, median and mean.

From another website.


so:According to the Federal Reserve, the average net worth for Americans between the ages of 55 and 64 is $1,167,400, while the median is at $187,300.

Of course that's just the beginning. Many articles that we read every day, not only mix mean and median, but completely ignore or do not differentiate between an individual, a married couple, or a household.

To paraphrase REWahoo: Words is hard

 

[scrabbler1]

One metric I have often heard when describing something money-related is the very inexact "typical," as in, "a typical family of 4 will receive $x from the tax cut." What the heck does "typical" mean? Is it the mean, median, or, perhaps another rarely used metric called the "mode"? As someone with a stat background, it annoy me a lot to hear this term because I actually know the difference between the other 3 term (mean, median, mode).

 

[scrabbler1]

I understand the difference between mean and median but math is not my strong suit and my only basis statistics class was almost 50 yrs ago. Some memories are a little bit of a struggle. If you have a curve for the median with the midpoint at $187,300 what does the curve look like on either side of the midpoint? It doesn't seem like it would be a bell shaped curve. For example what if a large number of the left side of the median curve are under $25k? Wouldn't the curve look like a roller coaster or be skewed to one side of the median point depending on the labeling of the X and Y axis?

Cheers!

A curve with the median being a LOT lower than the mean would be a bell-shaped curve shifted to the left (with a small or no tail on the left) and a long, perhaps bumpy tail extending to the right. Imagine a ski jump going from left to right with the high, starting point on the left with the far lower point on the right.

 

[pb4uski]

At the end of the article, the author states "By the time you’re of retirement age, your goal is go have 80% of your current salary saved for every year after you retire."


I strongly disagree with this statement, as do many users of this forum who have been living on 50% of their salary for many years and have been investing the rest. I was able to safely retire at this 50% spending level.

While I agree, to be fair that isn't a bad statement for the vast majority of people who live paycheck to paycheck... 80% is a reasonable approximation for net pay to gross pay and assuming a 30 year retirement that would mean having savings of 24 times withdrawals which is a WR of 4.2%

 

[imoldernu]

Hmm... This thread has taken a turn that I didn't expect.

The intent was to draw attention to the loose use of the term average.

What's the price of the average house?
What's the average weight of a person?
What's the average time to commute to work?
What's the average IQ? college student?grade school student?politician?

From Wikipedia:

In colloquial language, an average is a single number taken as representative of a list of numbers. Different concepts of average are used in different contexts. ... In statistics, mean, median, and mode are all known as measures of central tendency, and in colloquial usage any of these might be called an average value.

So... Back to the intent. In a world where everyone, every group, every organization has an agenda, the loose use of the term "average" is commonly used to foster those interests.

How about this? What is the average household income? After you find that, what is the average income per person in that house?

But then we all knew that, 'cuz we're all above average, right?

 

[Running_Man]

Frightening that half of the pre-retirement group has under $187K of net worth (including their home), when it will require $1M to generate a $40K annual retirement income with a 4% withdrawal rate.

32% of retirees hold a pension that pays a median of 25,000
median Social Security payment is $14,400 so for a median couple they are receving 28K in SS benefits, which would be tax free along with 7K from their net worth. and 16K on average of pension benefits (25K *.32 * 2 for a couple) for a total of 51K at the median, median US income is 60K so that 51K is 85% of US median income and would be mostly tax free unlike those working. 23% of over 65 are working for a median income of 25K per year, that is probably helping those that have no pension

 

[dunkelblau]

so:According to the Federal Reserve, the average net worth for Americans between the ages of 55 and 64 is $1,167,400, while the median is at $187,300.

Maybe this is a realistic example of a Lake Wobegon effect, where all the wages are strong, all the cars are good-looking, and all the net worths are below average.

 

[pb4uski]

I understand the difference between mean and median but math is not my strong suit and my only basis statistics class was almost 50 yrs ago. Some memories are a little bit of a struggle. If you have a curve for the median with the midpoint at $187,300 what does the curve look like on either side of the midpoint? It doesn't seem like it would be a bell shaped curve. For example what if a large number of the left side of the median curve are under $25k? Wouldn't the curve look like a roller coaster or be skewed to one side of the median point depending on the labeling of the X and Y axis?


Cheers!

Yes, given the mean and median, the distribution would be skewed to the right assuming that net worth increased from right to left.

 

[Rianne]

Mean: Median:

25,000 15,000
30,000 25,000
60,000 30,000
150,000 60,000
15,000 150,000
56,000 30,000
Same numbers, different meaning.