Every three years, the Federal Reserve publishes its Survey of Consumer Finances (SCF). The SCF provides a detailed snapshot of income, assets, liabilities, and net worth across American households. The most recent survey was conducted in 2022 and published in October 2023. The headline figures are detailed below.
- The mean income among American households increased 15% to $141,390.
- The mean net worth among American households increased 23% to $1.06 million.
Readers looking to benchmark their financial status against the U.S. average should know two things. First, while mean and average are often used interchangeably, they are not the same. Average encompasses all measures of central tendency, including median and mode.
In this scenario, the median is the best option because the data is not evenly distributed. The top 10% of American households account for 67% of total household wealth, while the bottom 50% of American households account for less than 3% of total household wealth, according to the Federal Reserve Bank of St. Louis.
Second, age plays an important role in determining income and net worth simply because older individuals have had more time to get promotions and save money. So, readers looking to benchmark their financial status against the U.S. average should focus on the median numbers within their specific age group.
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The median income among American households by age
Median refers to the middle number in a data set. It is also called the 50th percentile because half of the numbers in a given data set fall above the median, and the other half fall below the median.
The chart below details the median before-tax income among American households based on the age of reference person, defined as the male in mixed-sex couples and the older individual in same-sex couples.
Age Group | Median Income |
|---|---|
18-34 | $60,530 |
35-44 | $86,470 |
45-54 | $91,880 |
55-64 | $82,150 |
65-74 | $60,530 |
75+ | $49,070 |
All Households | $70,260 |
Data source: Federal Reserve 2022 Survey of Consumer Finances.
As shown above, American households reported a median before-tax income of $70,260 in the 2022 SCF. That means half of households reported more income, while the other half reported less income. The median income increased about 3% between the 2019 SCF and the 2022 SCF.
The median net worth among American households by age
Net worth is defined as assets minus liabilities. In the 2022 SCF, the most commonly reported assets were bank accounts (99%), retirement accounts (54%), and stocks held in brokerage accounts (21%). Likewise, the most commonly reported liabilities were credit card debt (45%), residential mortgages (42%), and vehicle loans (35%).
The chart below details the median net worth among American households based on the age of the reference person.
Age Group | Median Net Worth |
|---|---|
18-34 | $39,040 |
35-44 | $135,300 |
45-54 | $246,700 |
55-64 | $364,270 |
65-74 | $410,000 |
75+ | $334,700 |
All Households | $192,700 |
Data source: Federal Reserve 2022 Survey of Consumer Finances.
As shown above, American households reported a median net worth of $192,700 in the 2022 SCF. That means half of households reported a greater net worth, while the other half reported a smaller net worth. The median net worth increased 37% between the 2019 SCF and the 2022 SCF.
Prudent budgeting and smart investments are the surest way to build wealth
Some readers may be disappointed with how their financial status compares to that of their peers. But anyone can build wealth through proper budgeting and smart investments. Many financial advisors recommend the 50-30-20 framework, which divides income into the three spending categories detailed below:
- Needs: 50% of income should be allocated to necessary purchases like food, housing, and utilities. Minimum debt payments also belong in this category.
- Wants: 30% of income should be allocated to discretionary purchases like vacations, entertainment, hobbies, and luxury items.
- Savings: 20% of income should be allocated to retirement savings. Debt payments above the minimum also belong in this category.
In general, financial advisors recommend paying off high-interest debt before saving money for retirement, which includes investing in the stock market. The definition of high-interest debt varies, but it typically refers to debt bearing an interest rate of at least 8%. Credit cards are the most common example.
Why pay down high-interest debt before saving? The interest rate on credit cards and other high-interest debt could easily exceed stock market returns, let alone the return on other investments like certificates of deposit (CDs) and high-yield savings accounts. In other words, your total debt balance could increase faster than the value of your investments if you don't prioritize high-interest debt over saving.
Once high-interest debt is eliminated, it makes sense to simultaneously save money and pay down low-interest debt. Historically, the U.S. stock market has been one of the best places to park money over long periods. The S&P 500 (^GSPC 0.97%) -- a barometer for the entire domestic stock market -- outperformed virtually every other asset class during the last decade, including real estate, precious metals, fixed income, and international stocks.
Investors can get direct exposure to the U.S. stock market by buying shares of an like the Vanguard S&P 500 ETF (VOO 0.96%). The S&P 500 more than tripled in value during the last decade, such that the index returned 12.8% annually. At that pace, $100 invested weekly in the Vanguard S&P 500 ETF would be worth $94,800 after 10 years and $411,200 after 20 years.
Trevor Jennewine has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
