Baltimore, Maryland – A recent survey has revealed that the average American household’s net worth has surpassed $1 million by the age of 50. The surge in household wealth has been attributed to the record pace at which it has grown during the pandemic. According to the federal Survey of Consumer Finances, the median net worth of American families soared by 37% between 2019 and 2022, reaching $192,900 after adjusting for inflation. This marks the largest rise ever recorded by the survey.
The substantial increase in household net worth has been driven by surging home values and a rise in stock ownership. As a result, the average household net worth for Americans in their late 30s now exceeds $500,000, while late-forty-somethings have a net worth exceeding $750,000, and fifty-somethings have hit the seven-figure mark.
It’s important to note that these figures represent averages, which are significantly skewed by the contributions of the super-rich. For instance, the median net worth of the “average” American household in the 50-59 age range is around $300,000, a far cry from the $1 million average.
The breakdown of net worth by decade provides further insight into how wealth accumulates over the years. In our twenties, many of us are just starting out, often grappling with student debt and relatively low-paying jobs. By the thirties, income is likely rising, but so are expenses, particularly for those buying their first homes and starting families.
As individuals progress into their forties, the equity in their homes increases, and they enter their top earning years. Home equity and appreciation, combined with the effects of compound interest, push the average net worth towards the upper six figures.
By the age of 50, many Americans attain the mythical status of millionaire, mainly due to the rising value of their homes and the substantial growth in their retirement accounts. On the other hand, the sixties see average net worth peak at close to $2 million for Americans in their late sixties.
As individuals transition into their seventies, they experience a decline in net worth as they move into the “spend-down” phase of their retirement. This decline is especially pronounced for those no longer working and drawing down their retirement nest egg, while also facing rising healthcare expenses.
Ultimately, while the numbers provide insight into average net worth by age, it’s important to remember that individual circumstances can vary widely. The amount of money needed for a comfortable retirement depends entirely on an individual’s spending habits.