Late last year, while I was slaving away at retirement, the Federal Reserve released the data from its regular Survey of Consumer Finances. This is a project they do every three years to get an idea of how well, or poorly, we’re all doing. One measure is our wealth.
Yes, our government loves us.
These surveys were the basis for my regular “Wealth Scoreboard” columns. Getting it done used to require a heavy-duty number cruncher/researcher and the Dallas Federal Reserve was kind enough to massage the data for me.
Today, you can get the data on a great statistical website, www.dqydj.com. (dqydj, in case it’s not immediately obvious, stands for “don’t quit your day job.” That’s an indication its creator, known as PK, has a playful sense of humor in addition to a serious case of advanced nerdness.
In the chart below I’ve culled out the big divides of net worth from the website. It tells you the minimum level of net worth, at different decades of age, that you need to be a member of the top one, five, ten and twenty-five percent of U.S. households. It also tells you the median or 50thpercentile level of net worth.
But now, if you want to know preciselywhere you stand on the wealth pyramid, you can visit the site and get a figure down to the single percentile at: https://dqydj.com/net-worth-by-age-calculator-united-states/
| The American Wealth Scoreboard, 2016 | |||||
| This table shows the entry level for net worth for each age bracket rounded to the nearest thousand dollars. The figures include ownership of stocks, bonds, mutual funds, bank and retirement accounts, as well as home equity and consumer durables such as cars. They do not include virtual wealth (income rights) such as Social Security and pensions. | |||||
| Age | Top 1% | Top 5% | Top 10% | Top 25% | Median |
| 80+ | $11,784 | $3,647 | $2,183 | $714 | $271 |
| 70-79 | $11,674 | $3,478 | $1,923 | $713 | $234 |
| 60-69 | $16,161 | $4,729 | $2,011 | $756 | $225 |
| 50-59 | $14,747 | $2,633 | $1,138 | $415 | $138 |
| 40-49 | $ 2,864 | $1,372 | $ 668 | $279 | $ 88 |
| 30-39 | $ 922 | $ 386 | $ 256 | $103 | $ 29 |
| 18-29 | $ 977 | $ 99 | $ 65 | $ 17 | $ 4 |
| Sources: www.dqydj.com from the 2016 Survey of Consumer Finances | |||||
Understated Wealth
One thing the chart doesn’t reveal is that it understates our collective wealth considerably. The stock market has been kind since then. So has the housing market. According to the Federal Reserve Flow of Funds data, household net worth rose by a whopping $13.6 trillion between the first quarter of 2016 (about when the survey was done) and the same quarter this year. That’s a 15.6 percent gain.
And if you happen to live in the state of Texas, well, you’re probably a good deal better off.
Home Equity Is A Good Starting Block for Wealth
Does that mean everything is hunky dory? Sorry, no. If you find yourself anywhere in the top 25 percent, you’re in great shape. But as countless surveys remind us, most Americans don’t have enough saved to maintain their standard of living in retirement.
How can that be, given that the median net worth of the median household at age 60 is $225,000? Simple. For most households, home equity is a big chunk of net worth. Our home may be our pride and joy, but more often than not it represents a lot of committed spending— with or without a mortgage.
You can get some idea of how important home ownership is to net worth by some other figures on the dqydj website:
— Households in their early 40s have net worth of $87,800 if they are homeowners, but only $36,300 if they aren’t.
— Households in their early 50s have net worth of $137,900 if they are homeowners, but only $50,100 if they are renters.
— Households in their early 60s have net worth of $224,800 if they are homeowners, but only $105,900 if they aren’t.
Some Have Money To Burn (or Give Away)
One pattern that you can see in the table is that most households accumulate wealth and try to keep it. For all but the top 5 percent, net worth rises with age. Then it levels out after age 60. But those with still higher net worth tend to distribute their wealth as they age. Net worth for the top 1 percent, for instance, declines from its $16 million peak in their 60s to $11 million in their 70s and 80s.
A Cool Million May Not Be What It Used To Be, But It’s Still Rare
Visit the magazine racks at Barnes and Noble and you’d think the world was overrun with millionaires and multi-millionaires. Who, after all, can afford the houses, cars, watches, stoves, etc. advertised in most of the glossy magazines? In fact, those in the top 10 percent don’t get to be millionaires until they are in their 50s— and it’s a good bet they don’t feel like millionaires are supposed to feel because they’re probably making tuition payments.
Even So, You Can Be A Millionaire Just By Saving Regularly and Well
While the media slobbers over the new mega-rich from the latest high-tech IPO, there is still a simple formula for getting to be nicely well off:
— Get as much education as you can
— Marry and stay married
— Own a home
— Save regularly, efficiently, and be diversified.
Curious about how your wealth relates to retirement and financial independence? Check my latest “Life of Riley Index”
On the web:
Federal Reserve Flow of Funds: Balance Sheet of Households and Nonprofit Organizations
https://www.federalreserve.gov/releases/z1/dataviz/z1/balance_sheet/table/
This information is distributed for education purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service.
(c) Scott Burns, 2018