Average and Median Net Worths

Here's an interesting article from CNN Money. It has a bit of "down with the rich" tone that I dislike (they say the U.S. has the "top rank in one net worth measure -- wealth inequality") but it lists average and median net worths for Americans, two numbers I don't recall having seen together previously.

The facts:

• Average American Net Worth: $301,000
• Median American Net Worth: $44,900

As they point out, a few very wealthy individuals bring up the average and that's why there's a big difference in the two numbers.

A few other interesting facts:

• Americans' median wealth puts us in 19th place in the world, below Japan, Canada, Australia and much of Western Europe.
• The median wealth of American families was $77,300 in 2010, a nearly 40% drop from 2007, according to Federal Reserve statistics. (due to the economic crisis)
• Australians have the highest median net worth, coming in at $219,500.

The article notes that "those down under have a mandatory retirement savings program, where they must squirrel away more than 9% of their income for their Golden Years, and they carry relatively low credit card and student loan debt." No wonder they have higher net worths -- they spend less and save more!!!

The piece says it's easier to borrow in America which eats away at a person's net worth. Yes, yes it does, especially if it's uncontrolled.

I was taken aback by the low net worth number. If most people have net worths in the $30,000 to $60,000 range, that's pretty poor IMO. What are these people going to do in retirement? How are they going to make it?

Anyone else have thoughts on these numbers?

Comments

[Matt]

If it sounds too good to be true it probably is not.

If it sounds to bad to be true it probably is not.

I have grown to not trust articles like this from any news source.

[Steve]

The 2014 government stats at http://www.statisticbrain.com/average-american-net-worth-statistics/ are much more useful since it isolates age groups. Once you remove everyone under 35, the median looks a lot better.

[SJ]

Americans also have a mandatory retirement program and are forced to squirrel away 12.4% of their pay a year. We don't get to keep the money in our names and thus have a much lower net worth, but the income produced from that savings is real if you live long enough...

[#7]

The comments above are spot on.

Comparisons between countries are meaningless unless you can figure out how to factor in demographics, and socialized retirement programs.

For that matter, even private pensions are often not properly accounted for in net worth calculations.

[K D]

It seems like there is no end to mortgage cash-out refinancing among people I know, even if they are in their fifties or beyond, so I am not surprised by these figures. And these are people with much higher incomes than average or median. I think people just don't know how to say no. There is no doubt that all the access to easy credit has not been beneficial to most people.

[Duane]

"What are these people going to do in retirement? How are they going to make it?"

Like my bum of a father in law, who lived his primary wage earning years on a boat and never saved a dime, they will rely on other family to float them. It is pathetic, but there are a lot of people whose primary retirement plan is to make their immediate and extended family feel guilty for them. It is a tragic way of life but I think most of your readers are taking the steps so they wouldn't do this to someone they ostensibly love.

[crashdamage1957]

One thought on that low number... since net worth is assets minus liabilities, perhaps its these huge debts that so many Americans carry, what with buying million dollar homes with jumbo mortgages, that drags down the number, even for those people with decent 401k balances.

[Old Limey]

The following title is that of a 88 min. movie, available on Netflix.

Inequality for All
============

Discussing in clear and accessible language, former U.S. labor secretary and current UC Berkeley professor Robert Reich makes a compelling case about the serious crisis the U.S. faces due to the widening economic gap.

Unfortunately the whole population cannot be entepreneurs, engineers, doctors, attorneys, and computer science experts etc. which leaves a lot of people struggling to raise a family on a minimum wage income. This is particularly true in certain states and among certain minorities.

The world has changed dramatically since my wife and I came to the USA from England in 1958 and a great many former industries that employed lots of workers no longer exist. Check the items that you own and you won't find "Made in the USA" on too many of them.

[JimL]

What will people do? As mentioned by Duane, they will become a burden on family. We can also expect to see a very large voting block that will elect politicians that will support greater resourcing of government programs. Translation: higher taxes.

[jim]

I think Steve captured the biggest point here is that the numbers vary with age. People 55-64 have median net worth of $248k. Younger people who've saved little lower drag down the median for the entire population.

[Josh]

The average social security benefit is $1294/month. This is the equivalent of having a ~$517,600 net worth that adjusts for inflation and does not draw down on the principle.

If you use the 4% withdrawal rule it would be the equivalent of having an extra ~$388,200 in net worth.

[Squirrelers]

It's remarkable and in certain cases tragic when people have very little money and no real basis to be able to retire.

What will they do? I suspect many will just plan on working late into life, but that's foolish because two things might get in the way of that: 1) declining health; 2) ageism or outdated skills. When this happens, the next step is family help or living in abject poverty.

Best to save early and as much as possible, and live within your means. Life can be enjoyed to the fullest without spending extravagantly.

[YoungLimey]

I thought it was convenient that they included the forced savings for Australians, but not the forced savings for Americans (Social Security), in order to make thier political points more valid about the disparity in net worth. If you include the net worth value of SS, median net worth actually exceeds the average new worth.

[getagrip]

I can agree with the numbers.

I have several siblings and sibling in law who have lower net worths. None of them expect others to support them as none of them planned or currently plan to become burdens on their families, they just never really thought about the future until they began to hit their forties. They aren't exactly in positions to save big but then again, they don't necessarily need much either. Many have asked my advice, and I've given the best I can for their circumstances to get them on the right path and point them to resources. However, in the end, they will likely live small. By that I mean with each other or with other kin where they can pool money for a small place, and live off the SS and other amounts they have saved or may inherit. They won't be taking cruises. They won't be buying new cars. They won't be seen at the local country clubs. They won't be having that expensive operation or elective treatment and will quite frankly, likely die younger for putting it off. Yet I expect they will all manage well for themselves on SS and savings until they hit a major medical issue, likely in their late sixties or seventies, and then it will be fast slide from there into a funeral plot or a medicaid nursing home until the end of their lives.

I see a lot of people in this position currently via parents of friends and family, and expect it to not change in the future.