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August 30, 2010


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$34k is scary low....

On the bright side, at least it makes me feel better about mine. :D

Is $34,000 include their retirement accounts such as 401k and Roth? If so, this is very bad news for all Americans working out there today. I'm soon-to-be 26 year old single male and have net-worth more than $34K if 401k/roth is included.

I'm sure people can survive with such a low-income in low-cost living area (midwest) but not very long.

What's one good advice for those trying to build their net-worth other than save more than spend?

Ditto EK. My position is life is as much luck (blessing) as hard work. I married late (33) after I sowed my wild oats. We got serious right away. We both had stable jobs. Both thought several times about changing jobs but neither of us did. (What if we had?) Now, over the period of 25 years, we have nice house free and clear, good pension and nice net worth. I don't know why the difference between good luck and bad. Some of it of course is wise decisions but that's not all of it. There's more than that involved. Not sure. Just thankful I am on the good side of the equation.

A few years back I ran into that average balance, and was pretty depressed! I thought I was doing well, then saw that number and felt otherwise... until I tried to find out what the median was! Once I found the median, I felt a bit better!

I'm doing okay compared to the stats above, but I need to pick up my employment game.

After you get past a certain point, and if you control lifestyle inflation (or lifestyle creep) all the excess money from additional income can be banked! This is what I need to do!

This is sad.

But on the other hand, should we really blame people for not saving tons of money?

It used to be that you didn't need millions to live a good life.

But something happened...Housing, college, general medical care, end-of-life care--all of these essentials have increased tremendously in the past 20 years, to the point where only the upper-middle or wealthy classes can really afford all these things.

Not surprisingly, most people just try to make do or do without. Also not surprisingly, when faced with their inability to accumulate the millions they'll need when older, more and more people just choose to enjoy the present and hope they'll die young. Giving up the iphone or big-screen TV now isn't going to make much of a dent in the cost of long-term nursing care, for example.

I wonder if there is a dip in net worth, as people save up for a house, spend it on the house, and then start saving up again? Considering that this is all-encompassing, how much do the people who are just starting off, who have a zero net worth, skew the balance? If student loans are considered as part of the net worth, are they counted with zero or negative?

The number is shockingly low, but if some factors such as student loans are considered in, its not quite as shocking.

Throughout human history, most people have worked until they couldn't work any more, accumulated only a little wealth, and then relied on their family to take care of them. A few individuals were able to accumulate enough wealth that they no longer had to work, and could simply rely on their wealth and their servants.

Over the last century or so, we've redefined "normal" to look like the second case, but the average person's wealth accumulation habits look like the first case. We've created the cultural expectation that when people reach a certain age, they can stop working and be taken care of by their servants, but haven't created the habits of saving to support that lifestyle. Instead, the lifestyle is supported through pensions and social security -- which people contribute to in a way that's hidden to them, and draw out in ways that don't necessarily match their contributions.

We created a cultural norm that says you can retire like you have a high net worth, but don't actually need to have any net worth at all, because the government (or your company) will take care of you. We created a cultural norm that says you retire on assets you don't personally control... and then we wonder why people don't save or invest in assets they do personally control.

I'm not surprised but it doesn't bode well for everybody's future. At 27, I "beat" the median net worth but not the average (yet). ;-)

I'd be willing to bet that 90% plus of the readers here exceed the median. 50% probably meet the average (It's your fault BFS for bringing down the average--just teasing). But I'd be willing to bet when age is factored in, say readers of 50 years to pull a random number (might be lower say 45)then the average mentioned above is higher here on FMF.

Not that this makes nay difference I guess.

MC - but our standard of living has increased by a ton in this country. Things that at one time were activities or toys of the wealthy are now accessible to the majority of Americans. Air travel. Personal computers. Cell phones. Automobiles. Microwave ovens. Air conditioning.

What was considered the "good life" 30 years ago would be repulsive to most Americans today. If it wasn't, i.e. if you could live today on only what the "average" American had 30 years ago, you could save a ton of money.

This is frightening and the numbers will only get worse as home and goods prices rise and salaries are stagnant.

Why does a "high grade nursing home" need to cost so much? If there's a need (and it looks like there will be) why couldn't some enterprising entrepreneur start a lower-cost nursing home that doesn't turn into a geriatric ghetto?

Thankfully, my parents are very frugal and shouldn't become a financial burden to me or my siblings.

We are above the median but below the average... I think we are doing pretty good since I just graduated from college a year ago and we have no home equity as we currently rent. I'm only 22, I got time to catch up the average and beyond. :)


Essentials? Long term nursing care wasn't very important 30 years ago because you went there to die quickly in most cases. Now with modern medicine and drugs we can keep you alive for a long time. Sometimes with questionable quality but who is gonna suggest grandma shouldn't get that 50 dollar a day drug that keeps her from having the stroke that would have put her down long before she got alzheimers.

Health care keeps lots of people alive now that would have died 30 years ago. Again, lots of drugs in addition to heart surgery, expensive chemo cancer treatments, brain surgery, etc, etc, etc.

We aren't denied what we could get 30 years ago. We can get now what no one could get for all of human history. Unfortunately it's very expensive and keeps us alive longer during the most expensive medical years of our life. I have heard that 2/3 of medical costs are spent in the last 6 months of life. I can't verify that stat but whatever it is, it's certainly large.

Ask people who are 70-80 what kind of medical care their grand parents had when they were 70. Both of my father's grandparents died of heart attacks in their early 60s. Everyone knew they had a bad heart and there really wasn't a thing they could do about it. One of them just went down on a hot day and to hear my dad tell it, everyone pretty much knew that was it, he just laid there and died.

So before you get all sob story about the rich getting what we all used to get, it's not quite true. The rich can afford more than the rest, this is true, but nearly everyone in this country, rich or poor, gets better medical treatment and lives a longer life than our grand parents generation. And as Bad_Brad says we all have more toys too.

So you don't have it worse, you have it better, but you just don't have it like you want it to be.

Hi Bad Brad & Apex,

I'm not whining or even talking about my personal situation at all--I'm 49 and doing very well. I'm just trying to better understand the situation that many other people apparently find themselves in.

I think it's simplistic to just say that all these people with the $34K net worth and no retirement savings are just stupid or got there by overconsuming.

It's actually unlikely that most people are that stupid--most people generally have pretty good common sense & street smarts.

The statement is also probably not true because it makes the rest of us feel reassured--it's so comforting to think that people with low net worth deserve it because they bought too many iphones!

That reassurance encourages biased thinking, something I try very hard to avoid. I prefer figuring out what is actually true--platitudes that make me feel good are of little use in the real world.

As Apex points out, our societal expectations (derived from our parents) were based on all of us "knowing" that we wouldn't live all that long and that healthcare cost substantially less. I was pointing out the same thing--we can expect a different life than our parents had.

There also seems to be a huge shift in financial income/outgo for today's younger generation compared to their grandparents. Now you need to start saving for retirement on your first job. But back then, you didn't--you didn't start saving (for retirement) until you were in your 30's or early 40's.

I think it is possible that the younger people these days buying iphones and upgrading their consumer lifestyles as soon as they get a job/raise are running their lives based on the unexamined assumption that their financial lives will be like their grandparents' lives. They also probably assumed that (like their grandparents') the house they buy will appreciate hugely and fund much of their retirement some day.

Change is always unexpected, oddly.


I think most people have two problems when it comes to being prepared for today's economic reality.

1. Most people just aren't wired to think for the extremely long term and aren't prepared to deal with the uncertainty it brings.

2. Most people cannot easily deny current pleasure in exchange for the promise of future security. I know this might sound like the first one but the first one is that people just don't even think about it. This one is that even if they do they find that they can't say no to that chocolate dough nut for too long. Eventually the future security loses out to the enticement of the current pleasure.

The real issue is that they have not seen much evidence that this is problematic. Why do asian cultures generally save up towards 20% of their income on an annual basis. Because the society operates differently. There has generally been an extreme lack of credit. You buy houses with cash in Korea. And the government safety nets were nearly non-existent so if you didn't have funds to take care of yourself your family did it or you didn't get taken care of.

One could argue that the great depression generation saw what happens when lack of money met lack of government support and lack of credit. That's why most people from that era were very tight with their money. Then the WWII generation (raised by the great depression generation) came back from the war, got on the GI bill and built GI houses, worked hard and were determined to give their family the best things that they have had growing up in the Great Depression generation. And they sacrificed through lots of labor to give their families the best they could. Unfortunately it created a baby boom generation that never saw the need to be financially frugal and it created a generation that wanted ever more and spent to get it and that legacy has continued to be handed down to some extent to generation X and generation Y. We have seen no examples of the need for fiscal responsibility and so for 3 or more generations now it has left the culture.

Unfortunately as the baby boom generation now goes to draw on very depleted govt funds right as our govt fiscal budget starts to spiral out of control we may be forced through very painful national means to move back in the direction of the great depression generation and the WWII generation.

I am convinced that until people see it in very direct and frightening ways (as the great depression generation did), you simply cannot put strong fiscal responsibility into most people because of my reasons #1 and #2 above. They have to be scared into it by witnessing very bad consequences that had occurred to people they knew who did not have good financial reserves.

The survivors of the Great Depression went on to become the Greatest Generation for the reasons given in the prior posting. I wonder how many of the 40.4 million Americans that are now receiving food stamps are part of the "Want it all Now" generation. Unfortunately there will be even tougher times to come and ultimately it will improve the habits of many people. We are already witnessing a large increase in the savings rate and a very large reduction in total credit card debt.

"Stupid is as Stupid Does" ...

It goes without saying that the decline in house prices and the fact that people are underwater on their mortgages contributes to the low median. I wonder what % of the population has a negative net worth.

The annoying thing in my estimation is that this low interest rate environment rewards borrowers and punishes savers, which is the opposite of what should be happening. The people who did the right thing by being frugal, saving for a rainy day, etc are essentially bailing out the people and corps who borrowed excessively and spent beyond their means.

If the median net worth of 115,000,000 households is only $91,304 it doesn't say much for the percentage of households that actually own their home outright, because, at least where I live $91K will get you a very nice RV but it won't even get you a mobile home. It would be very interesting to see the distribution of net worth by of those households by age.

"We all need to save and prepare to take care of ourselves and our own families -- and not leave it to others."

Good idea on a personal level, but -in a democracy - the majority will decide what will happen.

If the majority can't retire without government help, they will vote in a government that will help them.

Just sayin'

You are missing the point. We ARE the government. The government doesn't have any money of its own. They only have what they collect from us in taxes.
If the majority expect the government to help them to retire I am afraid they will be sorely out of luck. We are already running $1.5 Trillion deficits out into the future. That cannot go in indefinitely, even for us. You are thinking of the government as it it was your ultra rich father that is somehow going to take care of all of your needs just as he did when you were a child. Now as an adult you are expected to save and plan for your own future without help from anyone.

Old Limey,

Don't forget the gov't can borrow from the future generations as well... complicates things a bit.

How many people are in the average household... I'd guess 3 or 4, maybe 3.5. So it means there are 100 million households in the USA who, by definition of the average, have a total of $43 trillion dollars in wealth! That's a very big number...

This just tells me that the top 10% likely own more than 50% of that wealth given that the median is only 91K.


We aren't at the median yet, but are certainly ahead of the game compared to most people. Working on paying off debt first for the most part. That has been a huge boost to our net worth.

@Old Limey,

Governments aren't limited to taxes, they can borrow. What's more, governments can raise taxes and still borrow. This can 'buy' votes, because people usually vote for selfish reasons.

The Federal government can print money at any time, they can also take money out of your paycheck to fund your future social security but unfortunately instead of keeping it separate it all gets mixed together. Some expensive government programs are not even funded as part of the budget. The Medicare Prescription Drug plan is one such unfunded plan. Bush's $300 Billion tax cut was also unfunded, Medicare itself is incredibly underfunded as are many other large expenses including portions of the current wars, stimulus programs and unemployment benefit extensions.
This is why the current budget has a projected deficit of $1.5 Trillion, that's $1,500,000,000,000 or $1.5 thousand, thousand, thousand, thousand.

Here's another way of understanding what a trillion is:- A Trillion Seconds = 31,688 Years.

Unemployment is a disaster for all of those that are unemployed. Allowing lots of financial institutions to fail can also bring about a disaster. Millions of homes in foreclosure is also a disaster for the families involved.
However the biggest disaster of all will be produced if $1.5 Trillion deficits continue on into the future. That will cause the interest on the ballooning national debt to consume all of the government's income, bring down our currency, our economy, and ultimately our country.

I'm 75 and wealthy and I am concerned, however if I was far younger I would be deeply worried about my future but fortunately life has been good to us and we can coast along in the slow lane very comfortably and impartially observe what happens. History is full of the rise and fall of great empires. The British Empire was the most recent to crumble and disintegrate. There was a time when the sun never set on the British Empire and half of the globe was painted pink but WWII bankrupted the country by 1945 and all of the colonies were given their independance by 1947.

Old Limey, you are correct. Unfortunately so is Jeroen and Mike Hunt. Unless we return to rapid growth (highly doubtful) I don't any chance of us reducing the budget deficit anytime soon. The only time we had a surplus was when we had the dot com false economy making it look like the economy was growing much faster than it actually was (and to be fair Clinton did raise taxes on the rich and cut the military budget which added a little extra money but as the next paragraph shows those differences are not that big, but then again our problems in 1993 were a lot smaller than they are now so minor changes could have an impact. They won't have any impact anymore).

Bush's tax cuts should expire. All of them (and I am a Republican). If we do what Obama wants and expire them for those making over 250K we generate 700 billion over 10 years. If we expire all of them we generate 3.8 trillion (still not even a third of what we need to close the budget gap but the 700 billion is 1/20th of what we need to close the gap). Furthermore the Democrats are taking strong stances against any cuts in SS or medicare, raising retirement age at all, or any cuts in any social/education/etc programs. What planet are they living on where they think they can raise taxes on just the rich and keep spending like we have been.

Further the Republicans keep talking about tax cuts coupled with spending cuts but of course not cuts to the military. Tax cuts? Non military spending cuts? Excuse me? What planet are Republicans living on that they think we can (or even need to) cut taxes now. Tax revenues are now 15% of GDP, the lowest they have been since the 1940s and we apparently need to cut taxes. They won't cut anything out of the military budget but they think we can cut all the other items in the budget even though it has never happened not even when they had full control, so who is supposed to believe there is any chance that we will actually get cuts in other programs?

Both parties are talking their base. Both plans are exact opposite of each other. Neither plan actually solves the real problems.

How on earth does this get better when no one is really being honest about what it takes to solve it?

Got any opinions on how this goes Limey?

I don't have the solution for fixing our current problems but I hate to write about the way I really feel.

I was just very, very fortunate to arrive in the USA when the population was about 170 million, the country was in urgent need of engineers because of the Cold War, jobs couldn't have been more plentiful, houses were very cheap because of the great abundance of land here in the San Francisco Bay Area, the economy was sound, and salaries and raises were also good. Large budget deficits have been historically quite low and didn't start becoming excessive until Reagan took office.

Now we have 310 million people, the worst unemployment since the Great Depression, consumers so scared they aren't buying, banks aren't lending, and we are staring at $1.5 Trillion deficits for who know how many years to come.

If you have any good solutions I would love to read them.

Old Limey:

I don't think there are any GOOD solutions.

I think the only sensible and fair solutions is some modest increases in taxes (repealing all Bush tax cuts is a good place to start), some modest decreases in spending (nearly across the board), getting honest about our entitlement programs and reducing some of the payouts such as raising the retirement age on social security and we simply have to cover less under medicare. Prescription - D passed under Bush is a complete budgetary disaster as is the whole program. It probably needs an increase in the medicare payroll tax as well as a reduction in how much it can be paying out.

None of those are popular or very likely (except for raising the social security retirement age which I think will eventually happen regardless of all the hand wringing about it. It already happened once, my full retirement age is 67 now not 65 and it should probably be raised to 70).

In addition to those things I think what the debt situation needs is a decade or two of inflation running at 5-10%. If we could bring the budget closer to being inline and have slightly elevated inflation for 15 years, it would bring our debt situation back into line with GDP.

If something like this doesn't happen eventually math will force worse consequences on those who are now about 20-40 or so. What we have going on now cannot continue and things that cannot continue will stop. Either by controlled proactive measures or by catastrophic systemic stress (see housing bubble).

We are also above the median, but it is worrying to see how many are living on a precarious string...

To the entire board,
Thanks for some reasonable discourse. Special regards to Apex and Old Limey. Its downright pleasant to listen to your thoughts with a civil discourse that is mostly lacking in these times.

I think if you are reading this article, you are more then likely more shrewd financially then the average person. I think all of you "Im above the median and average" etc. might be suprised if you saw the actual numbers if they were ever released for the entire country and were acurate. Most Americans are broke. I read another article that put the median at 62k NW. If you are asking if underwater houses, student loans, credit cards, etc. are figured into this, the answer is YES! THAT IS THE BASIC FORMULA FOR HOW YOU FIGURE NET WORTH! Get out of your little bubbles and realize if you have a net worth of over 150k these days, you are very likely in the top 20% of the country at this point. Sad, but instead of just saying "oh, mine is way better" realize you are not the majority! You are the minority and there are tons of people who had something and now have nothing. Lots of suffering and heartache outside the "Bubble" you live in. Sad but true.

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