Net worth is a financial metric that can help you keep your picture of your finances in perspective. The average net worth by age, in this case, refers to the net worth of the households in the U.S. divided by the number of households. Metrics typically use households rather than individuals because a household can be one person or a large number of people. Net worth usually goes up with age as your income is higher, you own more assets and may have less debt.
If you have more questions about net worth, you may want to speak with a financial advisor.
What Is Net Worth and How to Calculate It
Net worth is an excellent measure of how Americans are doing financially since it takes into consideration everything you both own, your assets, and owe, what you owe. Your assets, or what you own, include cash, bank accounts, investment accounts, the equity you have in your home and more. Valuable pieces of jewelry are included. So are any collections you have that have financial worth like stamps, coins or classic car collections?
Your liabilities, or what you owe, include all your debt, including what you owe on your home, student loan debt, credit card debt and any loans you have outstanding. The difference between your assets and liabilities is your net worth.
If you want to calculate your net worth, you add up the value of all you own and subtract from that the value of all you owe your creditors. The difference is your net worth. If we want to extrapolate that to the entire population of the U.S., we can add up the value of assets of every household and subtract from that the total amount those households owe their creditors. The result is the net worth of the total American population.
Average Net Worth in the U.S.
When you calculate the average net worth of the population of the U.S., the same procedure is used with one more step. You subtract total household debt from total household assets for the entire population. Then, since there is more than one household, divide by the total number of households and the result is the average household net worth for the U.S. population.
It’s important to take into account the income disparity between the rich and the poor when calculating the average net worth of the U.S. population. The Federal Reserve conducted its last Survey of Consumer Finance in 2022, the results of which were released in October 2023.
In that survey, it found that if we just take an average of total net worth in the U.S., it is skewed upward since the top 10% of households hold 74% of the wealth and the top 50% of households hold 98% of the wealth. If you don’t adjust for this, the average net worth of an American household in the top 10% was $1.92 million or more, in the next 40% at least $192,000 and in the bottom 50% average wealth was just $46,000.
One way to get a better read on the average net worth of Americans is by using the median net worth of the nation’s population. The median is the middle number of a list of numbers when they are sorted either in ascending or descending order. If you list all households’ net worth in the U.S., the median net worth is $192,700. You can see the income disparity by the large difference in the average net worth and the median net worth in the U.S.
Average Net Worth By Age
Net worth tends to go up as you get older. Several factors are responsible for the increase, like finishing your education, inheritances, your income, family structure, ethnicity and housing status. This list is not exhaustive. The 2022 Survey of Consumer Confidence conducted by the Federal Reserve breaks out net worth by age and gives the average net worth and the median net worth by age group.
- Early Adulthood: If you are younger than age 35, the average net worth is approximately $183,380 and the median net worth is $39,040.
- Middle Age: If you are between the ages of 35-44, the average net worth is $548,070 and the median net worth is $135,300.
- Prime Earning Years: Between the ages of 45-54, the average is $971,270 and the median is $246,700.
- Aging: For those between 55 and 64, the average is $1,564,070 and the median is $364,270.
- Senior: Between the ages of 65 and 74, the average net worth is $1,780,720 and the median is $410,000.
- Retirement: If you are 75 and older, the average net worth declines to $1,620,100 and the median falls to $334,700.
Bottom Line
From the average net worth, as compared to the median net worth, for each age group, it’s apparent that the median net worth may be a more standardizing financial metric to use to analyze net worth by age in the U.S. Since 50% of the population only owns 2% of the country’s net worth, it makes sense that to get a true picture of net worth by age in the U.S., you have to use a measure other than an average.
Tips on Managing Your Finances
- Having a financial advisor in your corner to help you manage your finances can be a great idea. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you’re managing your money on your own, it pays to be prepared. SmartAsset has you covered with many free online resources that can help you figure things out and get a better hold on your finances. Check out SmartAsset’s free investment calculator and get started today.
Photo credit: ©iStock.com/Chinnapong, ©iStock.com/damircudic, ©iStock.com/aurielaki