Net Worth by Age: Means, Medians, and Misleading Numbers on the Internet
I recently came across this chart on Yahoo Finance titled "What is the average net worth by age?" Find out how you stack up against the national average.
These figures are from Empower, which claims the numbers represent “the average and median net worth of our typical dashboard user.”
But I think these numbers can be misleading and overly discouraging. For example, here is a chart from Apollo showing that somewhere between 43% and 49% of people in their 60s have nothing saved in a retirement account.
To make matters worse, if you look at the underlying numbers from the Fed’s 2022 survey, while the 55 – 64-year-old cohort has a median net worth of $364,000, the median non-financial asset portion of the balance sheet (houses, cars, boats, etc.) was $327k.
In other words, the median 55 – 64-year-old household only has a little more than $40k in financial assets to live on. *
And just yesterday, Apollo posted another chart under the caption:
Data from the Fed shows that households’ ability to come up with $2,000 for an emergency expense within the next month is at the lowest level since the survey started in Q4 of 2015. Taking into account that the CPI level today is 35% higher than in 2015, the situation is even worse.
According to the chart, roughly 38% of US households could not come up with $2,000 in an emergency.
Why Is This Important?
It is tempting to believe that all net worth is equal, but it is not. A person who owns a $2,000,000 home with a $1,000,000 mortgage but has nothing else saved is likely in a worse financial spot than the person with a $1,000,000 investment portfolio who lives debt free in a small, rented apartment. But the above charts do not tell you that.
The reality is that most people do not have a lot of money, they just have a lot of stuff, and confusing the two can lead to some of the biggest financial mistakes a person can make.
I ignore the average numbers because in the case of net worth, the average numbers are meaningless. If Bill Gates walks into a homeless shelter housing ninety-nine other people, the average net worth in the building immediately increases to over $1 billion per person.
*The Fed shows $67k of median financial assets for the 55 – 64 age group. The median of one category cannot be added to the median of another category to get an accurate combined total, but it is close enough.
On Wednesday night we hosted a social event at Talyard Brewing Company. The weather was perfect, the brewery tour was interesting, the food and drinks were excellent, and nobody hurt themselves playing pickleball.
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