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Average Net Worth of an American Family

Posted By Jim On 06/02/2009 @ 12:29 pm In Personal Finance | 100 Comments

Do you know what the average net worth is in the United States?

Every three years the Federal Reserve Board does a survey of consumer finances [3], which looks at a wealth of financial information, including income and net worth. They even have statistics of the percentage of people who use the Internet to find financial data broken down by the age of the head of household (did you know that in 2007, 16.5% of families with the head of household above 75 years of age used the internet?)

Well, that’s where I turned to find out the average net worth of an American family.

FRB Net Worth Data

The Federal Reserve Board slices and dices the net worth data better than the CNN Net Worth calculator, which I’ll talk about next. They discuss it as a value of income and age (of the head of household), but they also do it based on family structure, education of the head, race, work status of head, occupation of head, region, urbanicity, housing status, etc.

Across all groups, the 2007 median net worth was $120,300 and the mean was $556,300 (guys like Bill Gates and Warren Buffett really mess things up).

Here are a few of the more interesting ones (2007 median data, 2007 dollars):
Current work status of head:

  • Working for someone else: $350,100
  • Self-employed: $1,961,300
  • Retired: $543,100
  • Other not working: $124,100

Race or ethnicity of respondent:

  • White non-Hispanic: $692,200
  • Nonwhite or Hispanic: $228,500

Housing status:

  • Owner: $778,200
  • Renter or other: $70,600

How can you use this? It’s important to remember that you can’t make broad conclusions based on this data. Owning a home can help you get a higher net worth, but it doesn’t guarantee one. On the flip side, renting doesn’t mean you’ll always have a lower net worth. The same is true for your race or ethnicity and your work status (though I would imagine “other not working” will likely have an impact in improving your net worth).

The FRB has packaged up their data into a nice 56-page document called Changes in U.S. Family Finances from 2004 to 2007: Evidence from the Survey of Consumer Finances [4]. (25.2% of people without checking accounts gave this reason for not having one: “Do not like dealing with banks.”)

CNN Net Worth Calculator (Age, Income)

The easiest way to see how you stack up is by using CNN Money’s Net Worth calculator [5]. I don’t know how fresh the data is, they only cite Nielsen Claritas as their source (with no date), but it’s good enough for our entertainment purposes. They offer two median net worth charts, one based on your income and one based on your age (the two charts are independent).

Age:

  • < 25: $1,475
  • 25 – 34: $8,525
  • 35 – 44: $51,575
  • 45 – 54: $98,350
  • 55 – 64: $180,125
  • 65+: $232,000

Income:

  • < $25K: $1,250
  • $25K – $49K: $34,375
  • $50K – $74K: $168,500
  • $75K – $99K: $301,475
  • $100K – $124K: $301,475
  • $125K – $149K: $644,100
  • $150K+: $1,122,900

How can you use this? It’s tough, which is why I don’t spend too much time with these things. It’s good to know where you stand based on your age and income but it doesn’t give you a good path forward. It would be more useful to know how the net worth was distributed between the different asset classes. For example, if you’re 45 with $125,000 of income, where are your assets? Do you have a home in which you have $100,000 in equity and a stock/retirement portfolio with another $250,000? Are you the $644,100 net worth person (based on income) or the $98,350 (based on age), and where is that net worth?

This is like knowing your credit score relative to the national average of credit scores, without a path forward the information is useful only for entertainment.

Average Net Worth Dropped 23%

Did you know that between the fall in the stock market and the housing market, the average American net worth fell 23% in the last year? It was reported in February in an AP story published on CBS News [6] and while there has been a bit of a market recovery, it’s stunning to think a quarter of all assets held by Americans were wiped off the accounting books. The median net worth fell 17.8%.

How can you use this? Knowing the average went down 23% can really help you psychologically. If you saw your net worth fall by 10%, knowing nothing else, you’d probably be devastated (I know I would). It’s like seeing your retirement account fall 40% last year, it’s very painful. However, knowing that your net worth fell 10% when the rest of America, on average, fell 23%, means you’re better off than most. It means while you may have lost some, you dodged the bullet somewhat because you didn’t fall as much as the average.

Average Net Worth of Congress

A study [7] by the nonpartisan Center for Responsive Politics revealed that the median net worth of the incoming members of Congress is about $1.8 million, compared to the median net worth of the re-elected incumbents, which was $815,000. An executive director then says Congress “remains short on lawmakers who can personally relate to what the average American is going through financially,” which I think is an unreasonable statement when you consider $815,000 – $1.8M is not a ridiculous sum for someone who has worked as a professional and been prudent with their money for thirty or forty years. I’m not saying they’re pinching pennies or in the poorhouse, but to say they can’t personally relate is a bit inflammatory.

I’m always hesitant to put too much stock in “average” or “median” values for anything (I think net worth by age is meaningless [8]), whether it’s net worth or average credit scores, but it’s always good to know where you stand relative to everyone else.

So, how do you stack up?


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[2] Email: mailto:?subject=http://www.bargaineering.com/articles/average-net-worth-of-an-american-family.html

[3] survey of consumer finances: http://www.federalreserve.gov/PUBS/oss/oss2/scfindex.html

[4] Changes in U.S. Family Finances from 2004 to 2007: Evidence from the Survey of Consumer Finances: http://www.federalreserve.gov/pubs/bulletin/2009/pdf/scf09.pdf

[5] CNN Money’s Net Worth calculator: http://cgi.money.cnn.com/tools/networth_ageincome/index.html

[6] February in an AP story published on CBS News: http://www.cbsnews.com/stories/2009/02/12/national/main4798225.shtml

[7] study: http://www.opensecrets.org/news/2009/01/wealthy-freshmen-raise-congres.html

[8] net worth by age is meaningless: http://www.bargaineering.com/articles/net-worth-by-age-is-meaningless.html

Thank you for reading!