Family

Source: Social Security Administration.

Over the past twelve months, we've written a number of articles about "the average American." We've looked at single metrics -- like net worth, salary, and retirement savings. But we've never given a full picture of what the average American's finances really look like.

Of course, if we take all American adults -- young and old, those who have college degrees and those who don't -- and combine them into one huge pot, the information might not tell us much. For instance, the average American adult:

  • Is a 50 year-old female who lives in a household with 1.5 other people
  • Lives in a household that earns $63,784 before taxes
  • Carries just over $27,000 in non-mortgage debt in her household
  • Has a household net worth of $81,200 

But for the typical reader of this article, there's a lot that's missing. What if you're 25 and sitting under tons of student loan debt? Or if you're 65 and want to know where you stand against your soon-to-be-retired peers?

In order to give a better picture, I organized the information to account for the two variables that I believe do the most to explain the differences between finances in households: age and income.

Where do you stand among your peers of the same age?
Obviously there are going to be big differences in the finances of a newly married couple in their twenties and those on the brink of retirement. In order to account for that, the table below shows the median and mean pre-tax incomes and net worths for different age groups.

I chose income and net worth because they encompass several different variables -- like debt levels, spending, savings rates, and investment returns.

As you can tell from the enormous difference between the medians and means, high earners skew the data significantly. For instance, the median 40-year-old's household brings in $60,900. That means that half of U.S. households of the same age bring in less, and half bring in more.

But if we just add up the incomes of all households in this age range, the mean is almost 70% higher than the median: $102,000. That's because a small group of very high-earning households pulls the average up significantly.

You can choose which set of numbers is more valuable to your own personal situations.

What if we break it down by income?
Of course, we can control for some of this skew by breaking down net worth by one's income level. The Federal Reserve did this by dividing up all American households into percentiles, based on pre-tax income. Here's what that breakdown looks like:

Percentile

Median Income

Under 20th

$15,200

20th-40th

$30,400

40th-60th

$48,700

60th-80th

$77,900

80th-90th

$121,700

90th-100th

$223,200

Source: Federal Reserve. 

Figure out which subgroup your household belongs to. Then, to see how you're doing against your peers making the same amount, click on the corresponding tab for your subgroup.

I organized the data to show the difference between median and mean on purpose. This shows that while your level of income obviously plays a role in your family's net worth, there's a lot of wiggle room.

For instance, some families that earn less than $30,400 have been able to attain net worths of over $100,000. While that might not be enough to fully fund a comfortable retirement, it's an impressive feat nonetheless.

The key to being particularly high within your subgroup is simple: spend less than you earn, and invest the rest. Both parts of that equation are important: there's no replacement for a frugal lifestyle, and it'll make your retirement needs much lower. At the same time, money sitting in the bank doesn't get the benefit of compounded growth over years and decades.

If you're new to investing, check out our 13 simple steps to get you started on your investing journey.

Of course, every family's situation is different. But hopefully this gives you a snapshot into what really is possible based on your family's income level.

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