Money,Net Worth and things people dont wanna talk about?

Question

What do you think the average net worth for a retired person is? How much do you think for ages 20-30,30-40,40-50,50-60,60-70 ?

Bill F. · Answer

@Joshua D.

We don't need to guess. Our taxes pay to figure it out.

Census Data. Article about Fed data.

• Under 35: Median net worth: $11,100 (average net worth: $76,200).
• 35-44: $59,800 ($288,700).
• 45-54: $124,200 ($727,500).
• 55-64: $187,300 ($1,167,400).
• 65-74: $224,100 ($1,066,000).
• 75+: $264,800 ($1,067,000).

Google is cool..

Shiloh Lundahl · Answer

@Bill F. I agree with the data showing that the average American saves too little and has too much debt.  Our culture encourages debt, even on consumer items, which it didn't used to.  People in America didn't use to have a lot of consumer debt 60-80 years ago.  But today, it is more common than not to carry balances on credit cards for consumer items and past vacations.

I often ask people when I am teaching them about finances, "Would you say that we make more money then those who lived in the 50's.?"  People usually say yes.  Then I ask, "Would you say that our lifestyle with regards to more time with family and more leisure time and having less money stress has increased or decreased?"  They say that it has decreased.  That is so interesting.  We are getting paid much more, yet our lifestyle seems to be more stressful and our time with family seems to have been replaced by working more.  I find that very few households can afford to live off of a one parent income.  In most families, either one parent has more than one job or both parents are working to bring in money.

In my opinion, this is the problem:

Imaging that you are hauling bucket of water (which represents your income) into your home (which represents your life and family).  Now imagine you have 3 pipelines leaving your house.  The first pipeline has written on it taxes.  The average American pays roughly 1/3 in taxes (including all types of taxes).  Then second pipeline has written on it debt (the average American pays about 1/3 in servicing their debts - mortgages, credit cards, personal loans, student loans, etc.) And the last pipeline is what we live off of, but that pipeline gets squeezed because of inflation.  So if you get a 3% raise and inflation goes up 3%, it might seem like you are breaking even, however, your not, because every time you get a 3% raise, your taxes take 1/3 of that so your raise's buying power only really goes up 2%, yet inflation has gone up 3%.  So if you times that by 50 or 60 years the average American may make more a lot money, yet he or she will have less and less purchasing power, thus leading to the situation in which we get paid a lot more today, yet we have to work more and more to feel less and less financially secure.

It seems like the only way out of this situation is to own your own business.  Taxes for business owners are different than taxes for W2 earners.  Once someone can own their own business and learn to leverage systems and create passive or residual income and use that income to get out of consumer debt, then they can start shifting out of this downward financial spiral and start to create financial freedom.

Steve Vaughan · Answer

Interesting that the average drops a little from 55 on.  The median doesn't change much either after 55. Most apparently are retiring and drawing down on their 401s or whatever?  They need some RE.  We will have upward trajectories into the next generation!

Seeing the average and median is sad but not surprising, given the priorities most give to their purchases.  Vehicles, phones , fashion, coffees and dining out.  Put it in Shiloh's out-go bucket and watch their labors flow away.

My 13 year old will be happy to know he doesn't have to do a thing until 36 if he cares to be 'median'. LOL

As far as earnings now vs the 60's.  I asked my parents last year about car and home costs vs wages 'back in the day'.  My mom bought a new Mustang in 1966 for $2500 or $2200.  That's also what she earned her first year teaching in CA.  I year early career salary equalled a new car.

Dad bought his first house in 1967 in Chicago for $16,000.  He earned about  $5300/yr as a mason.  3yrs (single) salary for a house.  A couple ratios I found interesting.

Btw, dad sold the house 4 yrs later for $32,000.  Mom sold the car for nothing worth remembering.  People that buy more cars than houses end up with the sad NW numbers above!

Bill F. · Answer

You tackled a host of very interesting topic all  in one post! The entire idea of the "consumer culture" combined with easy access to debt is absolutely fascinating. The fact that they evolved together is not just correlation, there is some causality there, which each new advance in one driving the other. The one constant, Americans bough more and more, which is a sword that cuts for both good and bad.

I do have an issue with the idea that we make more money than we did 60 years ago, simply because it is so incredible difficult to measure. Due to inflation obviously we "make more" but does it buy more than it did in the 1950's? Maybe for some goods, bu not for others. This playlist from The Hoover Institute explains the difficulties with measurement much better than I ever could.

While I agree that owning a business is great and I can't not recommend it because I own one and take advantage of it to the fullest extent I can, just like I'm sure you do, I think a far simpler solution is, having less debt.

Bill F. · Answer

@Mike Dymski you nailed it. The average is skewed by folks like Max Levchin. $100M+ in an ROTH IRA!

If you are a data nerd like me, I'd recommend checking out the SIPP(Census) Data. It is collected over years and covers an incredible range of topics, from savings/investment( down to the individual account level), education, family structure...

The data shows us that we Americans either save to little or have to much debt.

Mike Dymski · Answer

Huge difference between the average and the median.  The average must be skewed by a small number of the ultra-wealthy.

I'd much rather talk about money than typical social media nonsense.

Andrew Gingerich · Answer

Pretty interesting discussion. Status Money is a relatively new site that calculates one's net worth relative to ones peers. You can also customize your peer group to see how you are doing relative to other American's outside your age and location etc. It's a pretty neat site that lets you compare other items such as credit scores and spending, again relative to your peer group and custom groups. I've found it very interesting to use. This site is kind of like Mint but has less budget like features and more comparison like features.

On raises and taxes: I am finding that I am paying less taxes over the last three years. I'm slowly learning on how to reduce my tax exposure (or at least deferral of) in all areas of my life, while my income has been increasing. Basically maxing out tax advantaged savings and keeping a close watch on all expenses on my rentals. Further still, this year my child tax credit is doubling and will further support my federal tax return. We minimize sales tax exposure in my state by trying to limit spending on b.s. stuff for the house. I would wager a guess that we spend less on discretionary spending today than we did three years ago. I realize this isn't the norm. I would generally agree that when individuals get raises they are normally spent on new car/truck payments, more stuff. Rather than increasing their 'spending' on tax shelters. Fascinating stuff all.

Dennis M. · Answer

Most people these days waste all their income on cars , booze ,trinkets and eating out ! If they can’t afford their toys they simply charge them on credit . America doesn’t save anymore like our grandparents did or other nations do .

Jeremy M. · Answer

@Shiloh Lundahl that my friend, is a fantastic summary.

I find it ironic that in this "enlightened" age we live in, our culture struggles the most with the simple things. One of them being "spend less than you make". Entitlement is not pretty.

Again...great points!

Steve K. · Answer

@Caleb Heimsoth

your link didn't work

here's one I found that is pretty interesting

https://wallethacks.com/average-net-worth-by-age-americans/

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