Please. The amount of sensationalization here is beneath HN. This is average which we all know is incredibly skewed towards high net worth individuals. The median (much more representative of the "standard" qualifier) net worth of an American household is far, far lower.
Some are old enough to remember (reruns of) a TV show from six decades ago called "The Millionaire".[0] In each episode, a surprise, life-changing gift of $1M from an anonymous private donor was made to someone not expecting it. That would be $11M in today's dollars, so the status that goes with being a millionaire has been greatly devalued (no surprise).
This is why I wonder if 401Ks will just turn into a dog chasing its own tail. I think today, they still hammer that you need to have 1 million in your 401K when you retire, something being said my whole working life.
Yep. If you want to retire on a 401k alone, you have to start putting money in it as close to the day you are born as possible.
If I get to have a kid I'm opening them a Roth IRA and putting all the money that I possibly can into it.
$10,000 on the day they are born would be somewhere in the $250,000 - $1,000,000 range (depending on whether they average 5% or 7%, and if it were to average 10% it would be $6.47 million at age 65), assuming no further investments were made on it and that there were no management fees attached to it, and that somehow they could resist the temptation to draw down from it early to buy a house or pay student loans, cover debts, etc..
I don't think you can do the IRA, but yeah, this is the way to do it. Event if you put just a few hundred in per month, it'll grow to a sizeable amount in 65 years. That means if your kids never put in more than the company match, they'll still have a pretty decent amount at retirement and have more money each month for rent or house payment.
I will speak with a CFP/CFA before I go about willy-nilly throwing sizeable amounts of money at something. I would probably also put the account into a trust that would prevent them from drawing down until they are 55 unless they are injured or otherwise have a desperate need that is more urgent than their retirement, like their child has an expensively treatable disease or something.
It really all depends on how much you want to spend in retirement. But, yeah, 1 million at 4% is 40K before taxes. The next thing you have to do is decide if you want to assume SSI will be around at your retirement. But if not, can you live on 40K per year?
When they have to re-introduce the US $10,000 bill, I hope they keep it just like the 1928 design. It's a cool design, and much better than anything since.
They’re both cool, they have different appeals. The Dutch bills are like an art house rendition of what hipsters would want to earn and spend, the US 10,000 is like “NYC, big buildings, big cars, capitalist empire” chic.
Clickbait unfortunately, this is median not mean. If you check the source data[1], 1m net worth is at roughly 90th percentile of US households.
Also interesting in the original survey - for the median household, over >80% of their wealth is in their house (and 2/3s of households have houses). Whereas stocks are mostly the domain of the wealthy.
> Debt secured by residential property was about unchanged between 2019 and 2022. About 42 percent of families in both 2019 and 2022 had debt secured by their primary residence, and the median amount of this debt decreased by less than 1 percent to $155,600 in 2022.
Man, everything is skewed by all the old folks that bought their houses decades ago.
An interesting observation is that if 99% of the wealth is held by 1% of people, and currency/wealth is only valuable insofar as people recognize ownership, if everyone just stopped recognizing ownership and we redistribute everything equally, 99% of people would stand to double their wealth on average
The interesting thing about that is that it's actually independent of the current wealth distribution I think, i.e. you could allocate any arbitrary amount to each person.
Nick Maggiulli breaks down the numbers better in "What is the Average Net Worth by Age?":
> So what is the median net worth of all U.S. households in 2022?
> $192,700.
> This is about 1/5 of the average net worth and an inflation-adjusted increase of about $50,000 since 2019 when the median net worth was $141,145.
> But, once again, these figures don’t adjust for age, arguably the most crucial variable we need to control for to do a fair comparison. So, let’s do this now.
Those numbers make this paper net worth increase seem so ridiculous. Did the median American really become 36% richer since just before the start of covid?
I suppose you could argue people spent less and were able to pay off a lot of debt. I suspect more that a housing correction is overdue, although it remains to be seen if this will take the form of housing staying flat while inflation nibbles away at the real value or an actual price drop.
Nick Maggiulli breaks down the numbers better in "What is the Average Net Worth by Age?":
> So what is the median net worth of all U.S. households in 2022?
> $192,700.
> This is about 1/5 of the average net worth and an inflation-adjusted increase of about $50,000 since 2019 when the median net worth was $141,145.
> But, once again, these figures don’t adjust for age, arguably the most crucial variable we need to control for to do a fair comparison. So, let’s do this now.
Somewhat off topic, but if you filter by the 'Other lines of credit' distributed by 'Percentile of income' there is a MASSIVE spike for the top 10%. Wonder if this is bad data or a result of the loans given out in 2022.
Even then, that median net worth figure includes paper gain on primary home value.
But homes are very illiquid because of mortgage rate changes and most scenarios where people can actually draw cash out of primary housing require some major change in lifestyle since both rents and replacement homes mostly track those same paper gains.
This report is mostly “see, things are great! Please please please don’t panic!” spin.
This report is an annual survey with published methodology and unsurprising results. Why does everything involving the Fed turn into a conspiracy theory? You can see exactly the composition of the increase in net worth, there's no secret motive to publishing this report that they always publish - it's just survey data.
> Why does everything involving the Fed turn into a conspiracy theory?
Because they are a secretive cabal of elites who have some control over the economy.
Or maybe because they keep telling us "the economy" is great but most people's day to day lives are worse and we can tell when someone's lying to us even if we can't quite pinpoint that lie.
Wealth does not need to be liquid to be wealth. Particularly when that wealth is a claim to not to have to pay rent, the biggest single expense of nearly every non-home-owning household.
The problem isn't that the wealth is illiquid. The problem is that housing wealth incentivizes behavior to turn housing into a zero-sum problem and thereby drive up the cost of housing, to the benefit of current homeowners at the express cost of all future generations and non-owning workers right now.
A rare miss. pg doesn’t completely fuck up almost ever, I think that essay is tied with calling Altman a successful first-time founder for “even pg blows it sometimes”.
The distance between mean and median doesn’t tell you much. For any distance between the two, including them being equal, you can fit a great many very different distributions. They are indicative but the underlying distributions matter a lot.
Are you trying to say that an equitable wealth distribution would make mean and median across the population the same? This is a very specific statistical conclusion that is hard to grok without unpacking some of the assumptions behind it.
I’m saying that a healthy-ish Gini coefficient seems to be in the 0.2-0.275 type range, and a warlord won’t die in his bed above 0.85.
It’s hard to get figures on us, but I used to get drunk with a bunch of Goldman quants who said we’ve been north of 0.5 once you cut the shit since 2008.
It’s neither widely known nor considered polite to point out that the 5 ish mass shootings a day in the US make it per-capita more dangerous than Syria.
So if you’re asking if I’m saying fuck rich people who exploit capture?
HN is in general the best thing on the Internet but the number of people who stand with Greenspan, Rubin, and Summers on knee-capping Brooksley Born because they think the Ayn Rand car looks cool is like, very high.
So I generally try to start that conversation in a roundabout way.
I guess I’m ornery today. Objectivism is fascism clotted with purple prose written by a welfare recipient.
I can't access the article, but since median household wealth is much lower, the Fed estimate must be imputing the value of future Social Security and Medicare benefits. If you are credited with future government benefits, shouldn't you reduce that by an estimate of future taxes you will pay? Otherwise the federal government announcing that Social Security benefits are being doubled would drastically raise the net worth of households, which is unrealistic.
My gut says that this is related to real estate, where most Americans have much of their wealth, which has seen price increases, and whose value the government props up with socialist policies. [1]
Is there any data exploring the relationship between real estate and median family net worth? I would be curious to see a model correlating property values to median household wealth - because I'd imagine there's a strong correlation.
[1] note: socialism strictly means "centralized planning", which these government programs are. So, I use the term in an academic sense, not a derogatory one.
No data to back it up at the moment but I am pretty sure that home ownership has historically been a big wealth builder for the middle class. It historically has allowed people to use leverage on a fairly stable asset, while doubling as a hedge against rent. Now this is of course excluding 2008 and whatever has happened in the last 3 years(more institutional investment in residential real estate).
That's why the median --- which is mentioned at 193k in the article --- is a much more useful metric for household income/net worth. It's just like saying whenever Bill Gates walks into a room, the average person in that room instantly becomes a billionaire.
It would be more useful if they counted expected lifetime income. Most assets are valued at net present value of discounted future cash flows. But they don’t count personal future income for the labor class in their wealth calculation. If you do, even people on welfare are basically millionaires.
Really tragic that you still fed the misleading nature of the title by repeating the median point. It was a really good article I thought and took the time to explain the numbers and related conclusions.
Sure. I agree that the title is incredibly clickbaity and misleading, but I really appreciated that the author took the time to explain the nuance of how misleading "average" can be when looked at in isolation and how the typical American actually looks like financially. With that, I was a bit disappointed to come to the comments and see that people still wanted to do the typical internet "well actually" and make the same exact point that was made in the article.
In the 75-90th percentile of net worth, the median net worth is over a million. So that means that in the 82.5th percentile onwards, it exceeds a million dollars. There are 131 million households in the US. That's 23 million millionaires.
U-S-A U-S-A U-S-A
Of course, this does mean something quite interesting. If each American millionaire gave up $10k, that would be equal cash accumulated to buy out Elon Musk's net assets at current market price. That means, interestingly, that all the things people are upset that a multi-billionaire like him don't do, we could do if we all felt like it.
The truth is we don't feel like it. I certainly don't. I want to keep my $10k :)
With the Gini index, mean household means nothing. What the median US household is worth is what means anything. If only one household had all wealth, its vicissitudes and upswings would change the mean - but not the unknown median.
Calling everyone a millionaire because inflation is rampant seems pretty disingenuous even if technically true. It used to mean that you were wealthy. Now it just means you have a house and a 401k.
Edit: for the naysayers, a new Ford truck costs $100k.
It's not at all "calling everyone a millionaire." The "Mean American household" is just the mean, not any real household. Example:
If you have a population of 1000 where one person is a billionaire and everyone else has $0, then the "mean person" is a millionaire when in fact almost everyone has nothing.
The real situation isn't a pure "winner takes all" like that, but it's still quite lopsided.
I think that wording is wrong. "Household" is not an algebraic unit, and thus there is no mean. We're left to interpret what is meant, and responsible statisticians would say "the mean net worth of American families"
> Edit: for the naysayers, a new Ford truck costs $100k.
What a childish, disingenuous claim. I'm sure there are Ford trucks going for over $100k -- the market for gigantic luxury "work" vehicles has been around for quite a while now. But they are also making trucks with a US MSRP as low as $23,400.[0]
66% of Americans own their home. I would expect more people have a 401k than that. But it also depends how you count non-working adults, who might own a home but not have a 401k (although then their partner's 401k may be considered theirs in part, perhaps).
