Median net worth in US by age

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Karamatsu
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Re: Median net worth in US by age

Post by Karamatsu »

I think it's even simpler: the power of compounding. If you assume a $30K per year real income, 5% savings rate, and 4% real return on capital, 40 years of compounded saving and investing would get you from 25 with $3K to roughly the inflation-adjusted $170K number at 65 with no real effort at all, and if the savings all went into a Roth they'd be even better off. But of course, at the end of the day, that's retirement with $170K. Given a 4% safe withdrawal rate that's living on $7K/year, well below the (US) poverty line. Good thing there is social security.
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fundtalker123
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Re: Median net worth in US by age

Post by fundtalker123 »

goggles wrote:This is flat-out terrifying. The US is in big, big trouble.
What is really terrifying is the possibility that those of us who did save will have to pay for those who didn't.
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zaboomafoozarg
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Re: Median net worth in US by age

Post by zaboomafoozarg »

Eh, being terrified does nothing except cost you sleep. Not worth it. Times are always interesting.
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steve roy
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Re: Median net worth in US by age

Post by steve roy »

... the main difference is that the older households purchased their homes before the housing boom/bush and still have equity ...
I'm surprised this pointed political statement wasn't excised by a moderator. [typo fixed by Mel. If you see a problem, use the new reporting mechanism (the "!" in the triangle that's located in the icons at the top of each post).]
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Re: Median net worth in US by age

Post by YDNAL »

dyangu wrote:The data from PewResearch is rather depressing. The net worth gap between young and old is 47 times, the widest ever recorded. A net worth of $170,494 for a household headed by a retiree is not an enviable position, but $3,662 for a young household isn't even enough for a medical emergency. Americans are much poorer than I thought.
Sure, 65+ year olds have been able to save/compound for 30 more years than 35- year olds.

The savings rate in the U.S. has been atrocious for decades - no mistery there.
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
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Re: Median net worth in US by age

Post by investnoob »

steve roy wrote:
... the main difference is that the older households purchased their homes before the housing boom/bush and still have equity ...
I'm surprised this pointed political statement wasn't excised by a moderator.
lol, I'm sure it is just a typo. He most probably meant "boom/bust."
peter71
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Re: Median net worth in US by age

Post by peter71 »

The many posts to the effect of, "people always accumulate assets as they age" seem to be missing the point. Here's how Bloomberg Businessweek explains things.
While people typically accumulate assets as they age, this wealth gap is now more than double what it was in 2005 and nearly five times the 10-to-1 disparity a quarter-century ago, after adjusting for inflation.
http://www.businessweek.com/ap/financia ... RMR800.htm

That's not to say one can't debate how meaningful the drop on the low end really is (i.e., "$2000 isn't really that different from $10,000 . . .") but that doesn't change the fact that the study basically controls for the "eternal verities" of saving by age that many have mentioned . . .

Best,
Pete
Colorado14
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Re: Median net worth in US by age

Post by Colorado14 »

NateH wrote:
For the majority of all americans, their home is their largest asset, but lumping all other assets into the Pew calculation doesn't help anyone understand the "trend".
I'm not necessarily disagreeing, but have always wonder about this statement, which I've heard/read frequently, as my home has never been my largest asset, my retirement accounts have been. I bought my first home at age 27 (if I recall correctly) and even then, my retirement accounts were more valuable than my home equity. I am guessing that retirement account > home equity is also true for many/most Bogleheads? What do you think?
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MossySF
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Re: Median net worth in US by age

Post by MossySF »

Let's not pretend economics have stayed the same.

40 years ago, a high school graduate could get a blue collar job to pay for the American lifestyle and keep that job for nearly their entire life and retire with a pension.

Today, a high school graduate can hope to flip burgers at McDonald's ... if they're lucky. If they're not lucky, they're competing with day laborers willing to work harder and for less.

Should it be a surprise that somebody starting with relatively little or no student debt can build up their net worth faster than today's students piling on absurd levels just to get a working class job?
lightheir
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Re: Median net worth in US by age

Post by lightheir »

peter71 wrote:The many posts to the effect of, "people always accumulate assets as they age" seem to be missing the point. Here's how Bloomberg Businessweek explains things.
While people typically accumulate assets as they age, this wealth gap is now more than double what it was in 2005 and nearly five times the 10-to-1 disparity a quarter-century ago, after adjusting for inflation.
http://www.businessweek.com/ap/financia ... RMR800.htm

That's not to say one can't debate how meaningful the drop on the low end really is (i.e., "$2000 isn't really that different from $10,000 . . .") but that doesn't change the fact that the study basically controls for the "eternal verities" of saving by age that many have mentioned . . .

Best,
Pete

With typical middle-class homes selling for north of $250,000 today unless you're living out in the boonies, it's not surprising that most young folks have their money tied up primarily in their homes. Even if you're making $100k/yr, it's not easy to accumulate that much money, and if you're on a mortgage, up that $250 to $400 with the interest payments.

It ain't the good ol days anymore, that's for sure. If you're young and compete in the US (and now the world), you'll be in that bottom percentile of earners that is falling farther and farther behind in every statistic. Part of it is gov't policies but a real part of it is just increased world competition for work. I knew this even 15 years ago, and pretty much none of my peers in their 30s ever grew up thinking they could just pick up a blue collar job with a good paycheck and pension and coast it in - that was gone even when I was in elementary school.
TJSI
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Re: Median net worth in US by age

Post by TJSI »

Well it is hard to earn and save money when you stare at a four inch screen 4-5 hours a day. Sorry, could not resist.

I think the questions are how do we reform the economy so that the young develop skills that others will value and pay for and how do we teach the value of good investment.
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market timer
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Re: Median net worth in US by age

Post by market timer »

TJSI wrote:I think the questions are how do we reform the economy so that the young develop skills that others will value and pay for and how do we teach the value of good investment.
Easy: Allow student loan interest rates and borrowing capacity to be determined in the free market by the same factors used by employers, namely GPA, SAT, major, and university. If government wants to subsidize student loans, they should pay 1%/year of each lender's total balance back to the lenders, and allow them to compete against each other. Could even maintain the existing income based repayment rules.
Last edited by market timer on Fri Nov 11, 2011 2:39 pm, edited 2 times in total.
rokidtoo
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Re: Median net worth in US by age

Post by rokidtoo »

soaring wrote:Be young again in this day and age or young again in the 50's? I'll take young again in the 50's sure but without doubt not interested in young again in today's era. No thanks.
I'd take young in the 50s. However, I'd rather be young now. I lived through the 50s. Boring...----Jim
campy2010
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Re: Median net worth in US by age

Post by campy2010 »

TJSI wrote:Well it is hard to earn and save money when you stare at a four inch screen 4-5 hours a day. Sorry, could not resist.

I think the questions are how do we reform the economy so that the young develop skills that others will value and pay for and how do we teach the value of good investment.
Is this really necessary? The lack of derisive comments on this board is one of its best attributes. If you can't contribute intelligently, then I think most of us would agree that you should take your comments elsewhere.
Alan S.
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Re: Median net worth in US by age

Post by Alan S. »

Not suggesting anyone should post real numbers, but it would be interesting to write down YOUR net worth in the middle of each of these age brackets. Perhaps the result is not that much different than the Pew report with relation to asset accumulation.

In other words, even if your assets were larger all along than shown in the report, how do the increases at each successive age bracket compare with those in the report that averaged much less for each respective age bracket?

Our assets may have grown at similar rates.
Nukeboilermaker
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Re: Median net worth in US by age

Post by Nukeboilermaker »

Looking at my spreadsheet my net worth is ~36,000 (Just turned 25) with just the big ticket items. We got rid of all debt with exception to the mortgage in middle of September and will greatly increase it by increased E-fund and 401K/Roth contributions over the next 2 months. I realized about a year and half ago I made way to much and had far to little in my opinion to show for it. I hope to follow in the steps of many people on this forum who planned their financial futures opposed to wishing for them.

Cheers,
Adam
lightheir
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Re: Median net worth in US by age

Post by lightheir »

TJSI wrote:Well it is hard to earn and save money when you stare at a four inch screen 4-5 hours a day. Sorry, could not resist.

I think the questions are how do we reform the economy so that the young develop skills that others will value and pay for and how do we teach the value of good investment.
I agree, but it's also unfair to blame the young today for their financial troubles if you're comparing to older generations. Those good-paying blue collar jobs with pensions that were standard in our parents' generation are long gone. If you asked a lot of folks in our parents' generation to compete in our marketplace, they'd be no better off than the current generation, technology aside.

I worked so hard to achieve things and not fall behind in HS that it would make my allegedly hard working immigrant father pale in comparison with the amount of stress, expectations and standards placed on me as early as elementary school, and I'm not alone in this day and age. It's just getting harder.
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snodog
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Re: Median net worth in US by age

Post by snodog »

I think we should bring back debtors prisons for all these kids who don't pay their student loans. Anything to hasten the revolution.
TheEternalVortex
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Re: Median net worth in US by age

Post by TheEternalVortex »

Is this adjusted for # of earners per household? If not it's pretty hopeless to compare across such large time differences.
gofigure
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Re: Median net worth in US by age

Post by gofigure »

There's no disputing the increase in income inequality over the past several decades.

Those 65 and older have had a lifetime to accumulate wealth. Some have been more successful than others and for those who've come up short, Social Security and Medicare will help. But there's seems to be some shortcomings in the measure of wealth here.

What's the value of SS, Medicare and Medicaid? Many hundreds of thousands I'd imagine. Are those numbers included in the survey?

Is the value of a child's education included, an expense many in that young age group would otherwise assume on their own if not for property taxes? What about the value of the potential earnings for someone with a computer science degree earned at a taxpayer funded State College?

These and other measures need to be taken into account. No?
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GregLee
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Re: Median net worth in US by age

Post by GregLee »

gofigure wrote: ... But there's seems to be some shortcomings in the measure of wealth here.

What's the value of SS, Medicare and Medicaid? Many hundreds of thousands I'd imagine. Are those numbers included in the survey?

Is the value of a child's education included, an expense many in that young age group would otherwise assume on their own if not for property taxes? What about the value of the potential earnings for someone with a computer science degree earned at a taxpayer funded State College?

These and other measures need to be taken into account. No?
Yes, it's difficult to get a sense of how well off people are, without taking into account all assets/liabilities and income/expenses at once. The article discusses income and wealth as though those two things were unrelated. Since this is an investment forum, I'd guess that for most here, wealth makes a greater contribution to future/potential retirement finances than income. Personally, though, I am pension rich and investment poor, so if I compare my income to the populations Pew discusses, I seem relatively well off, but comparing my wealth, I am much less well off. I wish Pew, or someone, would give us some statistics on a measure of wealth that takes income, investments, home worth, etc. all into account. We might adopt the rule that income is 4% of the wealth required to produce it, for instance.

I also agree that we ought to take health care costs into account, but it's less clear how to do that.
Greg, retired 8/10.
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Prokofiev
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Re: Median net worth in US by age

Post by Prokofiev »

Alan S. wrote:Not suggesting anyone should post real numbers, but it would be interesting to write down YOUR net worth in the middle of each of these age brackets . . .

Our assets may have grown at similar rates.
OK. I'll post real numbers, since I have them. I worked my way through college and had an assistantship thru-out grad school, so NO student debt. Started work at age 25.5 .
These amounts are all in nominal dollars . . .

Age --- Net Worth
20 --- $500
25 --- $1,000
27 --- (-$5,000)
30 --- $50,000
35 --- $125,000
40 --- $375,000
45 --- $850,000
50 --- retired at 47 with $1+MM

My low point was about 2 years AFTER I started full-time work. Needed clothes, furniture, etc. Also bought a condo at age 30 and had negative equity for almost 15 years.
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Colorado14
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Re: Median net worth in US by age

Post by Colorado14 »

Prokofiev, would you be willing to share any tips for the success you had from 40 to 45? I'm hoping to learn from others and also hoping to retire early, but am not sure that I can manage the increase from 40 to 45 that you did. I'm very impressed - you are an inspiration.
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Re: Median net worth in US by age

Post by hsv_climber »

Colorado13 wrote:Prokofiev, would you be willing to share any tips for the success you had from 40 to 45? I'm hoping to learn from others and also hoping to retire early, but am not sure that I can manage the increase from 40 to 45 that you did. I'm very impressed - you are an inspiration.
This "inspiration" is called "the biggest bull market in US history". My guess that 40 to 45 for him was somewhere around 1992-1997, i.e. 120+% growth in S&P 500.
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Prokofiev
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Re: Median net worth in US by age

Post by Prokofiev »

It seems many older posters have forgotten, and newer investors never experienced this, but from 1982-1999 the SP500 averaged 18.5% a year! Short-term bonds had total returns of 7-10% /yr and LT bonds 12-15%. Here is a Merriman link high-lighting some of the data

http://www.fundadvice.com/fehtml/psychh ... 2bear.html

So from age 35-47, I put $2-4k/yr into an IRA, maxed out my 401k and received a 6% match. I saved about $20k/yr, almost all in my tax-sheltered accounts. The rest (what there was) I spent. But from 1980-2001, my portfolio averaged almost 20% /year. I out-gained the averages primarily by being involved in 2 corporate take-overs and by a single risky bet back in 1988-89. Yes, that helped. But I would have made 15-16% without these special events.

So my timing was perfect. Not that I had very much to do with it. And you are probably thinking this can never happen again. But this is "recentism". After 12 relatively poor years, I would expect future returns to improve dramatically. Younger investors with 40-60-80% bonds /TIPS will pay a heavy price for not taking some risk. Or maybe not . . .

But I clearly remember reading a magazine article around 1981 or 82 -around the famous "Death of Equities" time. It explained how the current generation of job seekers was screwed and would never achieve the wealth then enjoyed by older workers. The previous generation had benefited from the GI Bill to attend college, used VA loans to buy new, inexpensive suburban homes at silly low interest rates of 4%. They had their choice of jobs in the 1945-1970 period, had secure pensions and SS and now owned homes with large equity gains. It actually sounded convincing at the time seeing that I was almost dead broke despite having a good job and was looking at 15% mortgage rates. Yet somehow it all worked out and less than 20 years later I would be retired on my own terms.
Last edited by Prokofiev on Sat Nov 12, 2011 6:43 pm, edited 2 times in total.
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Colorado14
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Re: Median net worth in US by age

Post by Colorado14 »

Thanks! That's really interesting. I can only dream of returns of 20% per year as that sounds amazing, to say the least. I would be happy to settle for S & P returns of 18.5% :D
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Re: Median net worth in US by age

Post by saurabhec »

Rick Ferri wrote:Just remember that poverty in the US is measured by American standards, not global standards. Poverty in the US is wealth to more than 4 billion people worldwide. This is why we have an immigration problem. I'm not being mean, this is a fact.
It depends. Poverty in the US is also accompanied by a great deal of crime and violence that is not always the case in places like India and China. Also America lacks a sense of family and community relative to these places, so the level of emotional support provided by ones peers is less. People immigrate here not to join the ranks of the poor, but to strive for a middle class or better life. However, I do agree with your larger point about poverty in the US being measured by different standards. A poor person in the US has access to many resources through which they can better themselves that the poor elsewhere don't have.
gerntz
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Re: Median net worth in US by age

Post by gerntz »

swaption wrote:My observations on this are as follows:

- Totally disingenuous use of statistics by the press in connection with this. Widely reported that the net worth of those 65+ is 47 times the level of those under 35, while the level 25 years ago was 10 times. The $3,662 number is so low that it makes such a ratio meaningless. For example, if that number was $1,000, it would be 170 times. As it is the prior level was $11,521, low no matter how you slice it.

- Generational differences in pensions vs. 401K accounts. Simply put, 25 years ago pensions were a much larger portion of retirement saving, but this was not included in net worth calculations. Today 401K accounts are included and this is undoubtedly meaningful for older persons.

- What can be done about this, very simple, just wait 25 years. If things are so bad for the younger generation, then we can now look forward to the day when this all reveses itself :wink:

- Any attempt to draw conclusions from this in terms of whether resources are inordinately allocated to the old is misguided. Sure, there are problems with municipal and teacher pensions, medicare, social security, etc., but using junk statistics like this does nothing to further the dialogue. It just gives fodder for all populist politians that need material to further polarize the issues.
You've nailed it. But why would you expect the press to do anything but sensationalize? To use a ratio & term it a "gap" when a gap is a difference is ignorance of math - common with the press - or deliberately misleading - also common with the press when senasationalizing. :thumbsup
peter71
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Re: Median net worth in US by age

Post by peter71 »

While I alluded to the same problem with the low end stats upthread, the change in seniors' wealth over time is a positive 42%. So even if the young had dropped 5% rather than 68% there'd be a story here:

http://pewresearch.org/pubs/2124/age-ga ... wealth-gap
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Re: Median net worth in US by age

Post by FrugalInvestor »

peter71 wrote:That's not to say one can't debate how meaningful the drop on the low end really is (i.e., "$2000 isn't really that different from $10,000 . . .") but that doesn't change the fact that the study basically controls for the "eternal verities" of saving by age that many have mentioned . . .

Best,
Pete

This was what I first noticed, but by reporting percentages fairly insignificant differences now appear huge! What really disturbs me is how low the median net worth is for all age groups, especially older Americans who don't have much if any time left to rectify the problem. If we had more Bogleheads I imagine these numbers would look very different.
Have a plan, stay the course and simplify. Then ignore the noise!
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Re: Median net worth in US by age

Post by gofigure »

.....do we have assets to manage because we're bogleheads or are we bogleheads because we have assets to manage?
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Re: Median net worth in US by age

Post by FrugalInvestor »

gofigure wrote:.....do we have assets to manage because we're bogleheads or are we bogleheads because we have assets to manage?
Some of each I'm sure.
Have a plan, stay the course and simplify. Then ignore the noise!
riverguy
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Re: Median net worth in US by age

Post by riverguy »

Older folks got the luxury of living through 30 years of debt fueled growth. The younger generation isn't going to have that same luxury as the debt growth has hit a wall and is no longer sustainable. It should be no surprise the older folks have more money. The old folks tend to forget this important detail. They pulled forward all of the demand already and are now expecting their kids to pay it back.
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Re: Median net worth in US by age

Post by VictoriaF »

gofigure wrote:.....do we have assets to manage because we're bogleheads or are we bogleheads because we have assets to manage?
Most of us have assets, because we manage our assets ourselves. Hedge fund managers, mutual fund managers, bank personnel, financial advisers, and other financiers are making their living off something. The money that become their income and assets comes out from the money that otherwise would go to investors. Their yachts are the yachts their customers are missing -- except that based on the statistics discussed here, ordinary investors are losing more than just yachts.

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NateH
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Re: Median net worth in US by age

Post by NateH »

Colorado13 wrote:
NateH wrote:
For the majority of all americans, their home is their largest asset, but lumping all other assets into the Pew calculation doesn't help anyone understand the "trend".
I'm not necessarily disagreeing, but have always wonder about this statement, which I've heard/read frequently, as my home has never been my largest asset, my retirement accounts have been. I bought my first home at age 27 (if I recall correctly) and even then, my retirement accounts were more valuable than my home equity. I am guessing that retirement account > home equity is also true for many/most Bogleheads? What do you think?
This is where you and most Bogleheads differ from the rest of the US population. :sharebeer

When you own a very large and very leveraged asset (again, the young are more leveraged in their mortgages), small % changes can show up as very large dollar value changes. The study ignores this and trumpets the loss in dollar terms.
4X top-twenty S&P 500 prognosticator. I'd start a newsletter, but it would only have one issue per year. | dumb investor during 1999 tech bubble, current slice & dicer.
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