Well folks, after writing over 2,300 personal finance articles since 2009, my job here at Financial Samurai is done! According to the 2022 Federal Reserve Consumer Finance Survey, the average American household's net worth, adjusted for inflation, was $1.06 million. That's right. The average American household, some of which consists of individuals, is a millionaire!
In comparison, in 2019 the average net worth of an average American household was only $868,000, a 23% increase. Even though a bear market wiped away about 20% of public shareholder wealth in 2022, we clawed a lot of our way back in 2023.
Preserving Our Millionaire Status
Given the average American household is now a millionaire, all that's left is figuring out how to preserve our millionaire status so that we never have to work in the salt mines again!
Thanks to higher interest rates, one way is to convert the entire $1.06 million into 30-year Treasury bonds yielding 5%. Earning $50,000+ a year risk-free without having to pay any state income taxes is a pretty good deal. We can thank the Federal Reserve for providing the average American such good fortune.
No longer do we have to worry as much about our finances and grind as hard. The anxiety we feel for our children's futures and for ourselves should decline with such high risk-free rates.
Over the years, I've discovered the benefit of having money is not about being able to buy stuff. Having money is more about stress relief, to know that whatever difficulties life throws at you, things will be OK.
Unfortunately, Not Everyone Is An Average American
Do you want to be average? Or do you want to be above average?
I would think that most of you would rather be above average to outperform the masses. Unfortunately, most people are not above average by definition.
Further, the more appropriate metric to measure the typical American's net worth is using the median.
The Median Household Net Worth Is More Reflective Of The Average American
According to the 2022 Federal Reserve Consumer Finance Survey, the median American household net worth was only $192,900. $192,900 is still a great net worth figure and is 37% higher than it was in 2019. However, it is 80%+ lower than the average American household net worth of $1.06 million.
The reason why the average American household net worth is 467% higher than the median American household net worth is due to the top 10% richest Americans.
The top 10% wealthiest American households have an average net worth of $6.63 million, according to the Fed. Meanwhile, households in the bottom 10% had a mean net worth of $5,300 in 2022. If we remove the top 10% and the bottom 10%, we come up with an average household net worth closer to $500,000.
The average net worth is calculated by adding up the net worths of all American households and then dividing by the number of households. The median net worth is calculated by finding the middle net worth of all net worths in a dataset.
Main Reasons For The Boost In The Average American's Net Worth
According to the Changes in U.S. Family Finances from 1999 – 2022 report, here are the main reasons why the average American got much richer.
Strong Housing Market
“For families that owned a home, the median net housing value (the value of a home minus homesecured debt) rose from $139,100 in 2019 to $201,000 in 2022. Meanwhile, the homeownership rate increased slightly to 66.1%.”
I continue to believe real estate is the best way for the average American to build wealth. The U.S. government is a strong proponent of homeownership. Meanwhile, real estate tends to ride the almost unstoppable inflation wave long term.
Renting is fine short-term, especially if you don't know if you want to live in a particular area for longer than five years. But over the long-term, it is unwise to rent because it is unwise to go against inflation and the U.S. government.
The forced savings creates disciplined wealth, especially for those who do not have the discipline to save and invest the difference. Over a 10-year period, the home equity realy starts to build.
As soon as you know where you want to live for five years or longer, I would get neutral real estate by buying your primary residence. As you replenish your funds, I would then buy a rental property to get long real estate.
You can also invest in private real estate funds and deals if you want 100% passive real estate exposure. After I reached my limit of managing four rental properties, I decided to invest in private real estate in the Sunbelt. This way, I could diversify my real estate portfolio and minimize headaches.
Increased Participation In Retirement Plans
“Just over two-thirds of working-age families participated in retirement plans in 2022, up slightly from 2019. While participation remained uneven across the income distribution, all major income groups saw increases in participation between 2019 and 2022. Conditional mean balances in account-type retirement plans rose for families in the upper half of the usual income distribution but fell for those in the bottom half.”
If you don't have a company pension, then you must contribute as much as possible to your 401(k) and/or IRA, if eligible. Take as much advantage of the tax breaks the government offers. 10 years from now, you will marvel at how large your tax-advantaged retirement funds have grown.
After you get done maxing out your tax-advantaged retirement accounts, work on building your taxable investment portfolio, real estate portfolio, and more.
Your taxable investments are what you need to generate passive income if you want to retire early or take things down. The path to generating a livable passive income stream is long, so start by tethering your passive income to individual expenses. For example, the $300 a month in dividend income will be used to pay for lunch.
Increased Stock Market Participation
“Participation in the stock market increased across the usual income distribution between 2019 and 2022, with families between the 50th and 90th percentiles experiencing a substantial increase. Amid a sizable rise in major stock indexes over this period, all major income groups experienced robust growth in the conditional median and mean values of their holdings.”
Roughly 61% of all Americans own stocks in 2023 according to Gallup. The higher the income and net worth, the greater the percentage of Americans who own stocks. As of 2022, the top 10 percent of Americans owned an average of $969,000 in stocks. The next 40 percent owned $132,000 on average. For the bottom half of families, it was just under $54,000.
The S&P 500 has historically returned about 10% a year, including dividends reinvested, since 1926. Therefore, owning stocks has proven to be a long-term net worth builder. That said, bear markets happen every 5-10 years and can easily wipe out 20% – 50% of gains. As a result, a proper asset allocation based on risk tolerance and financial goals is necessary.
Privately Held Businesses (Private Company Equity)
“In 2022, 20 percent of all families, 14 percent of families in the bottom half of the usual income distribution, and nearly half of families in the top decile of the usual income distribution owned a privately held business. Families that owned businesses had higher income and wealth than those that did not. Further, a family’s income and wealth increased with the number of employees in their business.”
I found the ownership of private company equity to be the most fascinating reason why the average American household is now a millionaire. The net worth composition by wealth shows the wealthiest Americans own the most private company equity.
As a result, to increase your chances of becoming a millionaire, you should either try to start your own business or invest in private growth businesses. Or even better, you could do both!
Invest In Growing Private Businesses
As a business owner, you build wealth by earning income and growing your company's equity value. Every dollar your private company makes boosts the company's equity value by a multiple. The reason why is because company's are acquired based on a multiple of sales, operating profit, or net profit.
If you can't or don't want to be a business owner, you can invest in private growth companies through an open-ended fund like the Innovation Fund. It invests in private growth companies in the artificial intelligence, fintech, proptech, modern data infrastructure, and development operations space.
Private businesses are staying private for longer, which means more of the gains are accruing to private equity holders. Recognize the trend and adjust your investments accordingly.
Shoot To Have A Net Worth Greater Than Average
From a personal finance writer's perspective looking to help readers build more wealth, it's great the average American household is now a millionaire. However, from an individual perspective, maybe the average person being a millionaire is not so great.
After all, if the average person is now a millionaire, this means being a millionaire is no longer special. Back in the 1980s, you could live a lavish lifestyle with a mansion and multiple luxury cars as a millionaire. Today, not so much, especially if you live in an expensive coastal city.
Hence, if you want to live an above average lifestyle, it helps to have an above average net worth. If you have more than the average person, you will feel better about your financial situation. When it comes to happiness and finances, everything is relative.
Target Net Worth By The Median Age In America
Given the median age in America is about 39 according to the Census Bureau, if you want to be above average, shoot to have a net worth goal greater than $1.06 million by the time you are 39.
Once you reach an above average net worth, life gets a little easier. You can buy a nicer house, drive a nicer car, feel more confident about having children, raise them without stressing as much about money, and so forth.
I've also discovered you don't need to have a top 1% net worth to feel rich. We're talking a net worth of $5+ million at age 40 and $13+ million at age 60 to be in the top 1%. Once your net worth surpasses the average net worth for your age, you will feel rich enough.
The human condition dictates that you just want to be slightly richer than your neighbor or colleagues to feel really rich. And if you don't subscribe to this type of financial comparison, I recommend practicing gratitude regularly in order to feel wealthier. The more you are aware about suffering, the less entitled and the more grateful you will be.
The Median And Average Net Worth By Age
Below is the actual median net worth and average net worth by age according to the Federal Reserve Consumer Finance Survey. As you can see from the data, the average net worth really gets a lift from those in the 55 and older age group.
It's nice to see the 75+ age group have a lower average net worth than the 65-74 age group. This means they are spending down their wealth and not dying with too much. After achieving a net worth over $1,500,000, you might experience a certain level of net worth serenity where you worry less about money.
| Age of family head (or reference person) | Median net worth | Average net worth |
| Less than 35 | $39,000 | $183,500 |
| 35-44 | $135,600 | $549,600 |
| 45-54 | $247,200 | $975,800 |
| 55-64 | $364,500 | $1,566,900 |
| 65-74 | $409,000 | $1,794,600 |
| 75+ | $335,600 | $1,624,100 |
The Number Of Millionaires Is Actually Declining
According to UBS's annual wealth report, the number of adults in the world with assets of more than $1 million fell from 62.9 million at the end of 2021 to 59.4 million at the end of 2022.
The number of millionaires in the US dropped by 1.8 million to 22.7 million. China had the second highest number of millionaires in the world with 6.2 million.
These statistics are a little concerning. It means the rich are getting richer, but the number of people getting rich is declining. Ideally, society wants more people to get wealthier to reduce crime, increase tax receipts, reduce government welfare expenses, reduce the number of wars, and increase life satisfaction.
The decline in the number of millionaires in America and worldwide is a good reminder to focus on wealth preservation. Once you have a lot of money, you must do what you can to hold onto your wealth. You only need to get rich once. Once you're rich, you can use your wealth to take care of your children and other people you care about.
Fortunate To Build Your Fortune In America
With 22.7 million millionaires in America, America has by far the greatest number of millionaires in the world. Hence, if you are born in America or work in America, consider yourself lucky! Based on the evidence, you have one of the highest chances of becoming a millionaire compared to any other citizen in the world.
Sure, there are no guarantees you'll become a millionaire just by living in America. However, at least you have one of the best opportunities to try.
Even if you don't reach a seven-figure net worth, your quality of life in America is still high. With a stable government, no wars, clean water, public parks, cheap internet, and plenty of space, America will always be one of the best livable countries in the world.
Related post: The First Million Might Be The Easiest
Reader Questions
Are you surprised the average American household is now a millionaire? What are some of the ways you became a millionaire or plan to become a millionaire? What's stopping folks from investing in stocks, real estate, and other assets that have historically increased in value over time?
Suggestions For Becoming An Average Millionaire
1) Read more. Pick up a copy of Buy This, Not That, my instant Wall Street Journal bestseller. It will help you build wealth in a risk-appropriate manner. Investing in yourself is huge so you have the knowledge to take appropriate action.
2) Invest in real estate. Own your primary residence and start investing in rental properties for rental income and capital appreciation. Dollar-cost average in real estate funds that invest outside your physical holdings for diversification.
3) Start a business or invest in private businesses. The greater the person's wealth, the greater the percentage of their net worth is in business interests. This includes owning a business and investing in private businesses. You can now easily invest in private growth businesses through the Innovation Fund, which invests in AI, proptech, fintech, and more.
Notice how Business Interests (dark blue) increases the higher the net worth. The richest Americans are entrepreneurs who own and invest in businesses.
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I can see for sure that there is a good % of Americans with a NetWorth high up there in money at around 500k to 800k in the middle with the bottom and top 10% not include. I myself not sure if I’m a millionaire or not. I’m currently at 70% disable vet with about $3200 in retired military pension.
The fact that average net worth of an American household is $1.06 million doesn’t mean that’s what average American household is worth. The distribution is very skewed by the richest 1% households, where the entry point is over $13.5 million and average net worth in this group is around $35 million. They control 31.3% of all household wealth. Most middle class is in the 50-90th percentile and average net worth in this group is just under $800K.
Average is meaningless for such a wide range of data.
Median, the middle number based on frequency of occurrence, is much less dishonest, you should try it.
Actually, average has a meaning. It means the mean.
I’m finding it fascinating some folks cannot accept both Average and Median, as if one blocks the other from existing. I wonder if this is indicative of the human condition and how a strong money mindset is necessary to build above average wealth.
The argument isn’t that median blots out mean. It’s to point out that “average net worth” being over $1 Million is a reflection of the structure of the distribution, which skews heavily toward high net worth households, and not a reflection of the typical household’s wealth.
How accurate are these data and the statistical analysis? The data collected by the federal reserve generally extracted from federal income tax filings.
Accurate within the dataset the government provides.
The reality is, nobody really knows the real number. There is an underground economy that isn’t reported. So the numbers could actually be higher.
A million dollars isn’t a lot of money anymore. Hence the word “average”.
If we were all millionaires like the Federal Reserve states then let us have that money. The federal reserve is a joke. The government right now is a joke.
How much would the average American’s net worth be if you don’t count the top 10% nor the bottom 10% of Americans? I think that would give us a more realistic value.
Thank you for your newsletter and all your insights.
— Mike
Good question.
Households in the bottom 10% had a mean net worth of $5,300 in 2022. So if you strip them out and strip out the top 10% with an average of $6.63 million, you’re left with closer to $500,000.
That the average American household has a net worth of $1.09 million does not allow you to say that the Average American Household Is A Millionaire. This is how statistics get twisted into clickbait. The average household net worth, and the average household are much different entities. You equated them in a fallacious step of logic. Having had a career in finance I’m sure you understand the distinction here.
This is good feedback as I assume the majority of people don’t read the entire article until the end. So I’ve included three more subheadings to make the data clearer.
You’ve provided a good reminder that most people skim, so it’s up to me to write more clear and concise.
See here:
The Median Household Net Worth Is More Reflective Of The Average American
According to the 2022 Federal Reserve Consumer Finance Survey, the median American household net worth was only $192,900. $192,900 is still a great net worth figure and is 37% higher than it was in 2019. However, it is 80%+ lower than the average American household net worth of $1.09 million.
re: What are some of the ways you became a millionaire?
My path to multi millionaire status has four main components:
1. Paying into my employer’s 3% contributory retirement plan (that had an awesome 5 year period certain payout formula that even a Fidelity Retirement Advisor couldn’t figure out) with every paycheck earned over my almost 29 years long career as a Systems/Software Engineer.
2. Living in our primary residence (purchased in 1987) for 36 years.
3. Purchasing a nearby rental property at the bottom of the housing market in March 2012. We were originally considering buying AFTER my retirement in 2013 (at age 55), but didn’t want the hassle of obtaining a mortgage loan without having any W2 income (hubby had already retired in 2005 just before turning 50). Plus, even though the housing market was going down, down, DOWN each month, who knew how long that would continue? So we started looking at potential rentals, and when we finally found one we could live with (that was less than ONE MILE from out primary residence), we pounced!
4. Contributing an average of 9% of my annual salary to my employer’s 401k plan over the course of my almost 29 years long career. I did not make any 401k contributions the first year after we purchased our primary residence since the mortgage payment was nearly FOUR times higher than our previous residence. (Oh, and we withdrew nearly all of my 401k money the summer of 1987 to make the down payment – thereby avoiding losing our shirts on Black Monday October 19 later that same year.) I think in all those years of contributing to my 401k there may be only one year where I actually contributed the max allowable amount. I always felt sort of guilty NOT contributing the max amount, but I would justify it by rationalizing that I was also paying 3% of my salary into my contributory retirement plan. So I didn’t feel too guilty.
There were a few other contributing factors:
1. Although hubby retired early due to health reasons, he never had any serious health issues during his working career.
2. Although I also retired early due to health reasons, for the majority of my working career I did not have health related absences. Thanks to State disability payments along with my optional short term disability employee benefit, I was able to keep up with the payments to my contributory retirement plan and thus did not lose any ground accumulating funds in that plan.
3. We only had two children, neither of whom went to an expensive 4 year college. Although they were both boys, so our food cost were quite large during their teenage years! LOL
4. We typically bought practical, modest (rather than extravagant) used cars about 2 years old, so never had outrageously large cars payments.
5. While the kids were living at home we went on less expensive cross country road trips for our vacations. Our most expensive vacation was our road trip to Walt Disney World the year before the eldest son graduated high school.
Bottom line: A lifetime of saving and reduced spending, along with a couple of unexpected breaks for which I am most grateful!
Sam,
Do you know how these net worth figures are determined ? I am skeptical that there is any accurate measure and that the average net worth is 1.06 Million.
How can the Fed determine that many American net worth’s without invading their privacy/ security?
They would need to know their bank account, investment accounts, real estate, and all their debts to accurately reflect their true net worth.
I’m sure the IRS could determine that for an individual if needed but all I can find is the FED determines the this figure. But how? And if it based on surveys people take can you really be confident they are giving accurate information ?
Good to be skeptical. What do you think the average and median net worth figures are?
There are tax records and public records for assets. It’s one of the reasons why you don’t want to lie when applying for financial aid. IF they found out you lied or omitted info, then your admissions offer may get rescinded.
From a tax standpoint because that’s what I do for a living, my corporation established a self directed 401k in 2006 with a Roth feature and we max funded Roth only every year and invest in real estate secured notes locally. Today it has amassed 1 mm per participant and the entire portfolio is tax free. An important point to make is the contributions may attribute to 10% while the earnings make up 90%. So we paid tax on the seed and the crop
That’s wonderful to hear the net worth figure for Americans is up so much! Albeit the average, up is still up! And that’s also great to know the median is also up 37% in four years or so. There’s a saying that goes happiness is progress, and I really believe that. So that makes me happy that net worths are on the up tick.
Now if only more states and cities would make personal finance fundamentals a required part of high school curriculum. I think we’d see even more progress in our lifetime.
Thanks for sharing these insights Sam.
Financial statistics seem to follow a power-law distribution, not a normal distribution; so why do publications insist on using averages to tell the story?
Also, 2,300 articles? Holy cow!
Yep, three posts a week without fail since July 2009. Let’s go!
Then there’s the newsletter and podcasts.
Like saving and investing, do it long enough and you can build a nice little asset.
I’m trying to lead by example so my kids and wife and can stay consistent, work hard, and not take things for granted. So much opportunity in America!
Bro this is dumbest article ever ain’t no way in hell the average American is a a millionaire…go jump in a lake
But I’m also too dumb to read past the first three paragraphs.
Right on! At least you’re honest. It’s pretty amazing how much farther one can get ahead if they are thorough.