Net Worth by Age

[Anon]

Does anyone know what the average net worth and average gross income per age is in the US? I would be curious how people who are ERing here compare to their peers at their age. It would be nice to see a per-year statistic as opposed to a group statistic. I think even one year in one's life makes a big difference when it comes to net worth and income.

 

[wabmester]

The census looks at net worth by age every few years.  Just about everybody here is well above the 80th percentile.

The median net worth for all households:

<35: $7,200
35-44: $44,275
45-54: $83,150
55-64: $112,048
>64: $108,885

Interestingly, the vast majority of wealth is in home equity.   The median net worth excluding home equity is almost constant for everybody > 35: between $13K-$32K.

http://www.census.gov/prod/2003pubs/p70-88.pdf

 

[John Galt]

I saw these net worth by age numbers somewhere
before. I was amazed then and am amazed now.

John Galt

 

[retire@40]

Holy cow! That's it How realistic are those numbers?
They seem extremely low to me, especially if they include home equity.

I would think most people who have owned a home for at least 5 years have at least $50K to $100K in equity alone.

 

[John Galt]

Well, some people never really accumulate much
of anything, and many are life long renters, so
homeownership is no help there. These people
(and the poor of course) bring down the average.
Still, I agree it doesn't look like much. Maybe it's just
from our vantage point though. I'm betting some of the
stuff we discuss here never enters the heads of many folks. For example. I can give you my net worth on the button any time you ask. Maybe most folks wouldn't
know how to begin, nor what to do with it if they knew.
I could be wrong. Just guessing.

John Galt

 

[dex]

My understanding of "median" is that 50% of people have less than those numbers and 50% have more than those numbers.

Another interesting aspect to the whole picture is credit card debt. "The average household with one or more credit cards carries $9,205 in credit-card debt, up from $2,966 in 1990, research firm CardWeb.com reports."

That make me all the more appreciative of the money and opportunities it allows me.

 

[John Galt]

I probably drove that "average household CC debt" up all by myself

John Galt

 

[Cut-Throat]

Well, some people never really accumulate much
of anything, and many are life long renters, so
homeownership is no help there.  These people
(and the poor of course) bring down the average.

I don't think renters are the biggest problem, I think it's folks that are house poor.

They have mortgaged a huge property, Filled it up with stuff bought on credit cards until they maxed out the card. Then they borrowed against the house, taking all the equity out to pay off the cards. And the cycle continues.

Most of these folks have almost zero equity, but have big property taxes, and high maintence costs.

Read the two income trap. -

 

[cute fuzzy bunny]

The data this study is built on, and its methodology (not described in this report) are inflicted with a few problems.

For starters, this is data gathered in the 99/00 time frame at the height of the bull market. I would hazard a guess that data from 97 or 03 would show a markedly different result.

Next, the methodology for gathering data for this (from my recollection, it'll be another cup of coffee before I fee like looking for it and re-reading it) was that they invited a fairly limited number of random households to bare their financial selves to the panel. If any declined, additional invitations were not extended.

Thirdly, these numbers are not audited; they're what the families SAID their assets and debts were.

Lastly, they do not say exactly how many families were specifically audited, only how many were invited. Even the invitation sample is not statistically valid for the group size.

So what you have is probably misreported and inaccurate information from a statistically invalid sample of people who wanted to brag at a time when net worth was at an all time high.



With regards to the original question, while I doubt that anyone can give a really valid answer by age group, its safe to say that cut-throats analysis is accurate. Most people in most age ranges dont have a pot to piss in, unless the pot was bought on a credit card or a HELOC. In fact, I'd hazard that a lot of the seemingly well to do families you know are living on a mountain of debt, rather than a positive net worth.

 

[sgeeeee]

In another thread:

http://early-retirement.org/cgi-bin...s_board;action=display;num=1094625787;start=3

someone asked about total money supply and how much we would have if we split up evenly. An article referenced in that thread:

http://economics.about.com/cs/money/a/money_supply.htm

indicated that the total M3 money supply, when divided up equally amoung all of us would provide about $37,320 per person over the age of 19. That's a very rough calculation, but it is surprisingly consistent with wab's data in this thread.

 

[cute fuzzy bunny]

However M3 does not include any debt or liabilities, so thats just liquid cash on the plus side. Take out the mortgage, the car loan, the credit card debt, the HELOC and so forth, then add in the value of non liquid assets and then you'd have net worth. With the exception of the home, most of those non liquid assets are depreciating, not appreciating. The debt is appreciating, not depreciating.

I'd also suggest that M2 or even M1 would be a better analysis of the average joes liquid assets as M3's additions are largely items that would be found in a rather well to do persons balance sheet.

 

[BigMoneyJim]

I would think most people who have owned a home for at least 5 years have at least $50K to $100K in equity alone.

How do you figure that? I thought the first 5 years (especially of a 30-year loan) hardly put a dent in equity, ignoring appreciation of the house. Plus creditors are pushing the home equity credit hard these days.

Still, I thought the numbers were low. I'd expect "normal people" to add in their cars, golf clubs and refrigerator into their net worth.

It's a bit of a shock comparing those numbers to what others on the board here have. I swear sometimes I feel poor in comparison to my fellow posters. (I have less than 2 years' worth of salary in my retirement account, but I've but 10 quarters into SS and have a DB pension plan, albeit non-cola.) Yet at 34 I have that $7200 number whiped.

 

[sgeeeee]

However M3 does not include any debt or liabilities, so thats just liquid cash on the plus side.  Take out the mortgage, the car loan, the credit card debt, the HELOC and so forth, then add in the value of non liquid assets and then you'd have net worth.  With the exception of the home, most of those non liquid assets are depreciating, not appreciating.  The debt is appreciating, not depreciating.

I'd also suggest that M2 or even M1 would be a better analysis of the average joes liquid assets as M3's additions are largely items that would be found in a rather well to do persons balance sheet.

This is hardly a precise calculation, but if you look at M3 per adult, I reasoned it was kind of like looking at everything that is owned by anyone, divided by all of the anyones. If you try to subract out debt, you simply add it to someone else's ownership so the end number doesn't change. As far as considering a different measure of money (M1 or M2) that doesn't make sense to me in computing the national average, but it really doesn't matter that much since they all provide a ballpark number that would fall in the range of wab's statistics.

 

[haha]

Here is a quote from Scott Burns column today, that doesn't make folks seem quite so clearly headed for the poorhouse.

"The most recent Survey of Consumer Finances showed that a net worth of $1.2 million put a household in their 50s in the top 10 percent of all households."

From this we don't know median, quartiles or anything but the 90th percentile. We do know from other studies that net worth is highly skewed, and exhibits heavy kurtosis. If $1.2mm puts a household into the 90th percentile, I imagine it takes quite a bit more to get into the 99th.

Of course, as someone mentioned above, simply owning a house in metropolitan California or the northeastern states for ten years or so might get a lot of people halfway to that $1.2mm

Another thing to remember is that the largest part of many, perhaps most people's financial security is provided by pensions and other entitlements. I think if these were accounted for conditions would look less dire.

Mikey

 

[retire@40]

How do you figure that? I thought the first 5 years (especially of a 30-year loan) hardly put a dent in equity, ignoring appreciation of the house.

You are right that you are paying mostly interest in the first 5 years, but I'm not ignoring appreciation of the house. Plus there is the original downpayment of the house which even at 10% would start them off at $20K to $50K. I know at least in the northeast, real estate has skyrocketed in the past 5 to 10 years. Net worth is based on current fair market value and most people that bought a home 5 to 10 years ago for $250K have a house worth at least $500K now. And if it's not rental property, the sale would be all tax-free!

 

[Hyperborea]

Another thing to remember is that the largest part of many, perhaps most people's financial security is provided by pensions and other entitlements. I think if these were accounted for conditions would look less dire.

Perhaps for the leading half of the boomers. Pensions are something that don't exist for most people younger than perhaps 50. The only pensions for those folks are in government and some large unionized companies (and those I wouldn't put too much faith in). As for "other entitlemens" the indicators point to things like SS being heavily cut by the time the X-ers become eligible and maybe even the trailing edge boomers.

 

[haha]

CBO-Baby Boomers Retirement Prospects

Here is a very detailed study of some of the questions debated above.

http://www.cbo.gov/showdoc.cfm?index=4863&sequence=0

 

[Zipper]

American mortgage payments are a tax deduction. We don't have that luxury up here so we pay off the mortgage ASAP. You have a huge refi business down there but you have no equity. :-/ I'm afraid you are all going to be "upside down" when the housing bubble bursts.

 

[John Galt]

Hey Zipper, you are generalizing again. We are not
"upside down" as we have no debt whatsoever on any
of our real estate. I will concede that many are in that
unfortunate condition however.

FYI today I washed the dishes, did the laundry, and washed my hair with Alberto VO5 shampoo.
I even cleaned the toilet and mopped the floor with it.
The whole house is more manageable, with shine and silkiness restored.

John Galt