The household net worth in the United States varies significantly across different age groups. Understanding the average net worth of households at different stages of life is essential for financial planning; and makes for good financial rubbernecking.
To gain insights into this complex topic, we turn to the Federal Reserve’s Survey of Consumer Finances (SCF), a comprehensive and reliable source of data that provides a detailed picture of the financial well-being of American households.
See Part 1 for discussion of household income in the United States.
In this article, we’ll delve into the average (median) net worth by age of households in the United States, shedding light on the factors that influence these variations.
The Federal Reserve’s Survey of Consumer Finances
The Survey of Consumer Finances, conducted by the Federal Reserve every three years, is one of the most respected sources of information on the financial well-being of American households.
This extensive survey collects data on income, assets, debts, and other financial aspects of families across the nation, making it a valuable resource for researchers, policymakers, and anyone interested in understanding the financial health of U.S. households.
According to the latest survey results, the median household net worth in the United States was $193,000 as of 2022.
The Average Net Worth by Age Group
To get a clearer picture of the average net worth of households in the United States, it’s important to break down the data by age group. Households face distinct financial challenges and opportunities at different stages of life, which results in varying levels of net worth.
Younger Households (Under 35)
Younger households, typically under the age of 35, often face significant challenges in building their net worth. They are still early in their careers and may be paying off student loans or other debts. At this stage, homeownership is less common, and these households tend to have lower net worth compared to their older counterparts.
According to the Federal Reserve’s SCF data, the average (median) net worth for households under 35 was ~$39,000.
Middle-Aged Households (35-54)
The average net worth tends to increase significantly for households in the 35-54 age group. These individuals have had more time to accumulate assets, pay down debts, and advance in their careers. Homeownership is also more common within this age range.
As a result, the Federal Reserve’s SCF data indicates that the average net worth for households in this group was ~$136,000 for those 35-44 in age. And ~$247,000 for those households 45-54 years in age.
Pre-Retirement and Retirement Age (55-74)
As households move closer to retirement age, their financial situation evolves. They typically have accumulated more wealth through savings and investments, such as retirement accounts and real estate.
The SCF data shows that the median net worth for households in the 55-64 age group was ~$365,000; and in the 65-74 age group was ~$410,000 (the highest of any age group).
Retirement Age and Beyond (75+)
In the 75 and older age group, net worth can be quite diverse. While many retirees have significant assets, some may rely primarily on Social Security or other fixed incomes.
Nevertheless, the SCF data still indicates a relatively high median net worth in this age group at ~$336,000.
For those who have planned and saved adequately for retirement, financial security is a common outcome.
Factors Influencing Average Net Worth
Several factors influence the average net worth of households in the United States:
Education: Higher levels of education often lead to higher earning potential and, subsequently, a higher average net worth. Those households with a college education had a median net worth over 4x higher than those with just a high school diploma.
Homeownership: Owning a home is a substantial contributor to net worth. Home equity can be a significant portion of a household’s assets. Unfortunately, as a group, non-home owning households had a median net worth of only ~$10K.
Debt: The amount of debt, particularly high-interest debt, can have a significant impact on a household’s net worth.
Income: Higher incomes generally lead to higher savings and investment opportunities, increasing net worth. As you might surmise, net worth is concentrated among households with above average incomes.
Financial Planning: Households that engage in financial planning and savings strategies tend to accumulate more wealth over time.
Implications of Household Net Worth
Understanding the variations in average net worth by age and the factors that influence them has important implications for both policy and individual financial planning:
Policymakers can use this data to inform policies that address wealth disparities and promote financial security for all age groups, especially those with lower net worth.
Individuals can use this information to set financial goals, make informed decisions about education, homeownership, and debt management, and plan for retirement.
Median vs. Mean – Two different views of the “average”
The mean is the average of all values in a data set, and it is influenced by extreme values.
The median is the middle value when data is sorted, and it is not affected by extreme values.
In the case of household net worth, the mean is dramatically different than the median. This is the result of a “long-tail” of extremely wealthy households. Specifically, where the median household net worth was ~$193K, the mean household net worth was ~$1.1 million. About 5.5x higher!
Conclusion – Household Net Worth
The average net worth by age of households in the United States is a crucial metric for understanding the financial well-being of Americans at different life stages.
The Federal Reserve’s Survey of Consumer Finances provides valuable data that reveals the variations in net worth and sheds light on the factors that influence these disparities.
For the full report on the Fed’s Survey of Consumer Finances, please visit their website.
