based on anonymized data from in tens of thousands of applications for student loan refinancing.
The data comes from loan applicants. That's not a good source of net worth data. People refinancing student loans are probably already in some degree of financial trouble.
Definitely not a good source of net worth data, but I think it might actually be skewed for the opposite reason.
Most of the student loan refinancing options are targeted at low risk borrowers who can qualify for a lower interest rate. Generally the people who are in financial trouble won't be refinancing because the rates set by the government (which don't take individual credit risk into account) are already lower than they could qualify for.
The refinanced loans also don't qualify for income based repayment like federal student loans do, which is the last thing that people in financial trouble would want to give up.
There's still a massive sample bias problem. Financially responsible, employed MDs & JDs frequently pay off their student loans by ~4-5 years into their practice. That means that a MD/DDS/JD using a loan refinancing platform is probably just starting their career (likely, given the ages in this report) or has no clue how to manage their money (also likely, given the sample bias Animats pointed out).
This age bias doesn't necessarily extend to other professions, as someone with a bachelors or associates in a non-STEM, non-professional field might be paying off (and refinancing) their loans for decades.
The data here is interesting, but because of these biases, you have to take it with a grain of salt; it probably doesn't reflect the financial picture of the population at large.
It's typical - conservative even - for lawyers who end up going into BigLaw. $160K starting salary will let you pay off even a couple hundred grand in loans in just a couple years.
This admittedly is only about 20-30% of law school graduates, but in a survey of net worth, dropping the 20-30% of data points that are most likely to have high net worth will skew your average significantly.
You did - this is content marketing for their product, just like Hacker News is content marketing for YCombinator. Clickbait can still be interesting, and they did at least post numbers, but take it with the appropriate grain of salt.
The title was promising, but the data, yes definitely seems to be skewed and fairly strange...
I was hoping to find something like actual net worth by age.. you can also just calculate what people probably want to know anyway.. like if I'm X age, how much money should I have saved and how much should I be saving to reach X dollars by ~60 years old.. so I did that math..
Assuming 7% compounding interest -- investing in index funds for example:
To have 5 million in your stock accounts by age 60:
At age 25 you should have $125k, and contribute 25k per year
At age 30 you should have $200k, and contribute 35k per year
At age 35 you should have $300k, and contribute 50k per year
At age 40 you should have $500k, and contribute 70k per year
At age 45 you should have $850k, and contribute 100k per year
At age 50 you should have $1M, and contribute 200k per year
So I guess if you have a house that is worth $1M, then you only need to target $4M to hit that random value I picked, but I think most people would agree that having $5M in the bank would be basically plenty to retire on especially if it keeps growing while you are withdrawing from it..
Obviously this data set is heavily skewed due to the fact it comes from loan applicants. Can anyone suggest a better, more representative source for net worth data by age, income, etc.?
it's a bit of a shame they don't clearly define what the Y axis is - how they've reduced over the individuals. presumably they've taken the mean instead of the median values.
comparing the "net worth by age" to the values of "Average Wealth (No House)" from [1] and crudely trying to compensate for the different age buckets gives something like this:
x0 : mediam wealth (no house), dqydj
x1 : average wealth (no house), dqydj
x2 : average(?) net worth (also seems to exclude housing), earnest.com applicant cohort
age x0 x1 x2 x2 / x1
25-29 4.4 16.9 2.4 14%
30-34 16.0 58.7 16.8 29%
35-39 17.2 203.0 28.5 14%
values in 100k USD
I guess from this one could tentatively claim that being an applicant for student loan refinancing is correlated with low average net wealth relative to the population as a whole. Which intuitively doesn't seem surprising!
Did they simply take averages across all people in each bracket? I can think of very few reasons to have debt while having cash / investments surpassing the debt (exceptions aside such as retirement funds that can’t be accessed). Would have been better to split the groups in percentiles
A number of people believe you should take on low-interest debt (eg. student loans, introductory car payments, mortgages) and then invest the cash from them in higher-yielding investments (eg. the stock market, Bitcoin, P2P lending, new businesses).
IMHO these people are simply unaware of the concept of risk-adjusted returns or the idea that high-yield investments don't always go up and can, in fact, lose principal value, and they'll make up the next wave of bankruptcies when we next get a downturn. But the belief does exist, and has become increasingly more prevalent in the last couple years.
Student loans aren't good to lump with the others because the interest rates on the government loans can be obscene. I know someone who took out student loans from the government during very low interest (2012) and they got 6.8%.
With the expected stock market return below that, it's probably better for most students to just pay off the debt.
That seems really high to me. My student loans (2001-2005) were 4.5%. Has it gone up so much recently?
Edit: Just Googled. 4.5% is still a typical range for unsubsidized Stafford undergrad loans. 6.8% sounds like it was either a grad student loan or a parental (PLUS) loan.
I didn't like that they correlated by age, savings and career but not by duration in career.
If I worked retail until 30, and than went back to school to to become a dentist (and the survey was taken a year after graduation) that skews the data.
What’s striking is that net worth of MBAs is as low $30k - I am a programmer living in Eastern European country and my net worth is around $170k And I thought Americans are supposed to be richer
The net worth of MBAs who use a student loan refinancing platform is $30K. This is not reflective of the general net worth of MBAs, as once you start to build assets and no longer have student debt to service, you would drop out of their sample.
That depends on what you're measuring. The average individual American is worth $388,000 net, third in the world behind Australia and Switzerland. That figure is radically ahead of the rest of the world, except for a handful of countries.
The average Russian has a net worth of $16,000. The average in China is $26,000.
The median US figure, is far lower than the average, at maybe $60k today, with rising stocks / housing. That median figure is higher than Germany and Sweden, but well behind eg France at $120k or Belgium at $160k (they're #3 in the world at the median).
The median figure in Russia is $4,000. The median net wealth in China is around $7,000.
For the US it's simple: you want to be in the top 50%. Below that, wealth levels fall rapidly. In the US the gap between the average level of wealth and the median, is extremely high, as wealth tilts overwhelmingly toward the top half. Sweden and Germany also similarly have badly skewed median vs average net wealth figures (not quite as bad as the US though). As an engineer, you should be in the top 1/3 pretty easily assuming a decent career and income level (an average engineer in the US will earn close to 2x the median full-time wage).
Read the comment. It's a great example of why understanding the difference between mean and median is critical.
Imagine a room with 100 people. 99 have $100 in savings, 1 has $1 billion. What is the average wealth of the people in that room? What is the median wealth?
The data comes from loan applicants. That's not a good source of net worth data. People refinancing student loans are probably already in some degree of financial trouble.