The median net worth for the middle class hasn’t changed for decades. Conversely, the median net worth for the top one percent has performed extraordinarily well during the same time period. The main reason is because the mass affluent and top 1% regularly invest in stocks, real estate, and other asset classes.
Although making a high income is nice, having a high net worth is more important. High incomes come and go. They are also taxed aggressively. In contrast, a properly managed net worth could last forever.
One of the best incentives to get rich today is the record-high estate tax limit of $12.06 million per person in 202. In other words, Americans can all pass down up to $12.06 million to our heirs tax-free. That’s huge!
We can create a generation of adult kids who end up having zero motivation or self-pride to make something of themselves! Whoo-hoo!
$12.06 million is an incredible amount to pass on tax-free given the estate tax exemption amount was only $1 million in 2003. However, with Joe Biden as president, there’s a good chance the estate tax threshold will decline under his tenure.
The holy grail of personal finance is to amass a large enough net worth which spits out enough income to fully fund your desired lifestyle. If you can’t generate enough passive income to do so, sorry, but you are not yet financially independent.
On your journey to the promised land, it’s a good idea to gauge how you compare to others. After all, everything is relative when it comes to money. If we all have a $5 million net worth, being a multi-millionaire wouldn’t improve the quality of our lives at all.
The Median Net Worth Of Americans
Below is a chart from the Survey of Consumer Finances in 2019, the latest data available as of 2022. The Federal Reserve only conducts the survey every several years. One can assume the figures are even higher today.
The data shows the median net worth for the middle class, the mass affluent, and the top one percent.
- The Top One Percent has a median net worth of $10,700,000.
- The Mass Affluent (80th – 99th percentile) has a median net worth of $746,950.
- The Middle Class has a median net worth of only $87,140.
Due to inflation, all three median net worth figures by class are up at least 10% in today’s dollars. Let me share some analysis on each of the three classes below.
The Median Net Worth Of The Top One Percent
Lower-Than-Expected Growth
Back in 1995, the median for the top one percent was $3,734,607. Therefore, the median net worth for the top one percent grew by 187% during the 1996-2016 time period. This is much lower than I would have thought given the fierce rhetoric surrounding how rich the rich have gotten over the years.
If you stick $3,734,607 into a compound interest rate calculator, you will see that the top one percent net worth figure grows by 5.4% a year for 20 years. However, this 5.4% compound annual growth rate also happens to mimic closely the 5.6% compound annual growth rate of the S&P 500 between 1999 – 2008.
Highest Volatility
The median net worth of the top one percent is much more volatile than the two other categories. In 2007, the median net worth of the top one percent was $9,578,000. By 2010, however, the median net worth had dropped to $6,658,000, a 30.5% decline.
If I lost $3 million in net worth in just three years, I’d be depressed. Therefore, if you have a top one percent net worth, your #1 priority should be capital preservation, especially after a 10-year bull market. A $10,700,000 net worth should be able to spit out between $200,000 – $300,000 a year with little-to-no risk.
If you have no dependents, then living off $200,000 – $400,000 a year should be no problem for an individual or couple. One can assume that most people who have amassed a top one percent net worth, if they have children, are older and have independent adults.
Aligned With The Estate Exemption Amount
The estate exemption amount of $12.06 million in 2022 is close to the 2016 median net worth for the top one percent of $10.7 million. When we finally get the latest data from the Survey of Consumer Finance, the top one percent net worth will likely be at around $12 million as well.
Not only have risk assets like stocks and real estate performed extraordinarily well for the mass affluent and top one percent, inflation has also pushed up what it means to have a median and top net worth.
Historically, now is absolutely the most tax-efficient time to be a top one-percenter. Time to get cracking. Below is the historical estate tax exemption amounts per person. If you want to be a deca-millionaire, now is the time.
The Median Net Worth For The Mass Affluent
Mass Affluent Should Be The New Middle Class
The mass affluent class is where most personal finance readers are or aspire to be. Anybody who cares about their finances enough to read actively and listen to personal finance topics is usually way ahead of the middle class.
Caring about your personal finances motivates you to save more and invest more. You will figure out new ways to boost your wealth. Therefore, achieving a median net worth of $746,950 before becoming eligible for Social Security should be an achievable goal for the majority of readers here.
Using a 4% withdrawal rate, the mass affluent can fund $30,000 a year in gross expenses based on the $746,950 median net worth figure. Add on the average Social Security monthly check of $1,461 ($2,861 max), and the mass affluent has $47,532 gross to spend a year in retirement.
Given the mass affluent is defined as the 80th – 99th percentile income group, it is likely their average Social Security check is closer to $2,500. Therefore, the mass affluent should be able to spend closer to $60,000 gross a year in traditional retirement age.
Much Less Volatile Net Worth
In 2007, the median mass affluent net worth was $661,632. By 2010, the median mass affluent net worth fell to $560,400. This was only a 15.3% decline.
In other words, the median net worth for the mass affluent fell by half the percentage amount as the median net worth for the top one percent. For those who cannot stomach volatility, being in the mass affluent class is the way to go.
If you are currently in the mass affluent class then it’s probably worth still having a bias towards capital growth rather than capital preservation. Personally, I have consistently invested in growth stocks since 1995 to help boost my wealth. Dividend stocks are fine for after you’ve amassed a lot of capital.
Losing on average 15% of your net worth in a bear market isn’t unbearably painful. Continue to dollar-cost average in a downturn based on existing risk-appropriate investments.
It’s Worth Geo-Arbitraging
Relocating to a lower-cost area of the country or the world is a wonderful solution for the mass affluent class. A $746,950 net worth has multi-million dollars worth of buying power if one moves to Mexico, Thailand, Vietnam, Malaysia, Taiwan, or many Eastern European countries.
Although $746,950 won’t get you far in San Francisco, it should provide for a comfortable life in Minneapolis, where the median home price is only $267,000 and the median rent is only $1,591.
With herd immunity in progress, I suspect more of the mass affluent class will be moving to lower cost areas of the country or world.
The Median Net Worth For The Middle Class
Never Recovered From The Crisis
Unfortunately, the median net worth for the middle class looks like the EKG of a deceased person.
Originally, I had thought its dark blue line in the chart was simply the horizontal axis. And I thought the mass affluent light blue line was the middle-class median net worth line. Let’s look at the chart again.
If you have a median net worth of $87,140 for a middle class person and you are the median age of 38 in America, you’ve still got plenty of time to grow your wealth.
However, if you’ve got a $87,140 net worth in your 50s and 60s, life is going to be stressful financially. It is highly likely you will need to work longer. Or you need to become dependent on government programs in addition to Social Security.
What’s most concerning about the median net worth for the middle class is that it actually peaked in 2007 at $118,025. The 26.2% decline in median middle-class net worth by 2016 should be one of the biggest causes for concern for everybody. A revolution is brewing.
It is important to figure out how to convince people you are middle class if you are actually rich.
The Middle Class Got Spooked Out Of Stocks and Real Estate
If you do not hold assets such as real estate and stocks, you cannot benefit from a recovery in asset prices. It looks like the middle class got shaken out during the financial crisis in 2008-2009 and never got back in.
If the middle class had simply held all its assets until 2016, its net worth would have recovered and surpassed its 2007 high.
According to an ongoing Gallup poll, the rate of stock ownership as of 2020 is around 55%, or down significantly before the Global Financial Crisis.
In 2004, the U.S. homeownership rate peaked at 69.5%. The homeownership rate fell to a low of about 62.9% in 2016. But since then, the homeownership rate has steadily climbed higher to roughly 65.5% in 2021.
The reasons are likely:
- It takes seven years for a short-sale or foreclosure to stop punishing your credit report
- Mortgage rates continued to decline
- Real estate is seen as a more stable asset class
- More people are spending more time at home
Life Is Still Pretty Good As A Middle Class
Despite the middle class falling behind the mass affluent class and the top one percent class, being middle class is still a great class. When compared with non-Americans, the American middle class has a more comfortable lifestyle than most people in the world.
Most of us think of ourselves as middle class no matter our level of wealth. The reason is we adapt to what we have. Once we start comparing ourselves to others who have more, that’s when our disdain becomes apparent.
If you are in the middle class and want to break out, these median net worth figures are telling us that owning risk assets like stocks and real estate over the long term will likely help.
The worst thing you can do is rent for life. Don’t spend money on stupid things you don’t need. And please invest in the stock market. Unfortunately, it seems like this is what a significant portion of the U.S. population is doing.
Winner Take All Is Happening
According to the Survey of Consumer Finances, the top one percent owns 28% of all wealth in America. The middle class, on the other hand, only owns 21% of all wealth.
The inflection point where the top one percent begins to own more wealth than the middle class started in 2010. 2010 was also close to the bottom of the last stock market and real estate cycle.
The real estate market is strong on a national level. Meanwhile, the NASDAQ and S&P 500 had a phenomenal run since 2012. Meanwhile, there is still mass unemployment. The wealth gap is clearly going to widen during the pandmic.
The top 0.1% in America have gotten extraordinarily rich. The rest have simply not kept up. Below is a great chart that highlights the net worth by percentage income.
In fact, this massive separation in wealth performance over the years is one of the key reasons why I wrote my Wall Street Journal bestseller, Buy This, Not That. My book teaches everyone how to build more wealth so they can outperform as well.
The Median And Average Net Worth By Age
Let me leave you with one final chart to mull over. The chart shows the median net worth and average net worth amounts by various age ranges. I’ve also included a recommended column to shoot for based on my average net worth for the above average person framework.
The median net worth amounts by age show that Americans are better off than what the median net worth for the middle class indicates. If you’re retiring at 64 with $187,300, you’ll likely be fine so long as Social Security is still around.
The average net worth amounts by age are very telling. It shows the average American household is technically a millionaire by age 55-64. Is it any wonder why everybody wants to come to America. However, thanks to inflation, a million dollars doesn’t go as far as it used to.
The key net worth figure to shoot for is $3,000,000 by 55-64 if you’re just starting out. After all, $3 million is the new $1 million. It may sound hard to achieve, but if you save $25,000 a year on average for 32 years and earn a 7% compound annual return, you will get to $3,000,000.
Have Net Worth Goals
Now that you know the numbers, it’s good for you to have a net worth goal. I recommend everyone to at least have a net worth goal equal to the average net worth in America by age range.
If you’re doing very well, it’s best to spend more of your income and wealth before the government comes for it. Your spending will also help the economy. Paying a 40% death tax rate is terrible.
If you’re doing just OK, it may be worth taking more risk and working extra hours to generate greater wealth. Starting a side-hustle while having a job is absolutely one of the lowest-risk ways to try and make more money.
Even if you do nothing extra to improve your finances, know that life is still pretty great in America. Just try not to compare yourself too much with other people who have way more. Endless comparison is the thief of joy.
Recommendation To Boost Your Net Worth
Track your finances for free with Personal Capital’s award-winning financial app. The more you can stay on top of your finances, the more you can optimize your wealth.
The free online tool allows you to x-ray your portfolio for excessive fees. You can also track your cash flow and net worth. My favorite feature is their retirement planner.
I’ve been using Personal Capital for free since 2012, and it has done wonders for my wealth. Get your finances right the first time. There’s no rewind button in life!
Achieve Financial Freedom Through Real Estate
Real estate is my favorite way to boost net worth. It is a tangible asset that is less volatile, provides utility, and generates income. By the time I was 30, I had bought two properties in San Francisco and one property in Lake Tahoe. These properties now generate a significant amount of mostly passive income.
In 2016, I started diversifying into heartland real estate to take advantage of lower valuations and higher cap rates. I did so by investing $810,000 with real estate crowdfunding platforms. With interest rates down, the value of cash flow is up. Further, the pandemic has made working from home more common.
Take a look at my two favorite real estate crowdfunding platforms. Both are free to sign up and explore:
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing. For most people, investing in a diversified eREIT is the way to go.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations and higher rental yields. These cities potentially have higher growth too due to job growth and demographic trends. If you have a lot more capital, you can build you own diversified real estate portfolio.
Loading ...The Median Net Worth For The Middle Class, Mass Affluent, and Top 1% is a Financial Samurai original post. I’ve been writing about personal finance since 2009. Subscribe to my free weekly newsletter below and get richer along the way!
The comment about the estate tax exemption creating kids who will not be motivated is missing the mark. There is no reason that offspring should have to start off from scratch after 5000 years of hard work and cultivation by our ancestors. Passing down your success to your kids is what a good parent does. It’s a biological imperative. Aside from visionaries like Musk and Jobs, most people who are moderately wealthy are so because of a combination of hard work, an appetite for risk taking, luck, and being in the right place and right time. No matter how much of a hard worker or how smart a kid is, the circumstances for great financial success might not be there. Many today who have become wealthy have done so through working for FAANG companies. 10 years before or after would not have these opportunities. We should celebrate and be happy successful parents pass on their success to their kids.
The more pertinent question really is: how much to pass down. What do you plan to do?
We definitely need to talk to an estate
tax/attorney/accountant/investment advisor Dogen. Our thing has gotten so complicated, we really can’t do the responsible level of thinking necessary on our own anymore. We don’t think we are alone. Many others must be thinking the same thing.
If you want to take on the task, we could use a researched article on what the reasonable amount to pay for estate tax planning is, and (hoping against hope here) maybe a list of competent individuals or firms who could handle the task. We are probably talking firms ???, because in our very limited experience, no one individual professional wears enough hats?
Thanks profusely in advance for any guidance you choose to give.
I have about $10 million equity in a personal residence, a vacation home and an investment property. I also have about $5 million in cash, equities, IRA, resulting in a net worth of around $15 million. I am 57 and I certainly do not feel rich, particularly with high California income and property taxes. I am figuring I will need to have at more like a net worth of $18 million to ensure I can keep my properties and retire by 60.
You very well might given how much interest rates have fallen. Takes so much more capital to generate the same amount of risk-adjusted income. Keep hustling and good luck!
You have no worries unless cancer gets you
Why not even one mention of expensive long term care. At some point in wealth it will not matter so much as some little old just plain millionaire.
i think the writer is out of touch actual hand on touch with the middle class. the 2 keys to living a great life and having a happy retirement is the following. taxes should be cut ie any one family income of 100k should pay zero income taxes. after 70 years of age zero income taxes. the short fall would be made up with import tariffs. and less spending by the government federal. #2 is debit free on mortgage no credit cards no debit. experience being a canadian that s lived under socialism i can say if i lived in usa i would be 50% better off. free health care in ontario OHIP insurance cost us 16k person in tax money just think wife and i with 32k to spend what a health care program we would have.
I understand the desire to not pay taxes. But to say that there should be no income tax for households who makes under $100,000 sounds extreme. Who is going to pay for everything?
Shouldn’t we all try to Pitch in to help each other out?
Tell that to the top 1%
The top 1% pay over 37% of the taxes already. The bottom 10% pay only 30%. The top 1% not paying their fair share is a political illusion. They actually pay a significant amount
Well, technically they make and hold over half of the wealth; they should be contributing proportionally. Besides, the middle class is subsidizing them through tax credits and loopholes.
However, considering the language you use, I am well aware of the lack of good faith and wont pretend to think otherwise. We should be working towards are more egalitarian system of economics that adequately meet peoples’ needs, rather than top-down hierarchy one.
I work hard. It is all mine and I refuse to share it with higher taxes.
A couple of observations:
1. Wow! You have nearly 1,000 voters (or > 3%) with a net worth of > $10M. That’s a lot of rich folks reading this blog.
2. The 1% line keeps moving over time. I thought I was doing well financially but so are many people near the top. Probably best to focus on personal financial goals than to keep up with the Joneses but admittedly I’m a subtly competitive person.
3. Net worth data can be deceiving since there Is always a big debate about whether to include primary residence. Without the house, my parents would appear low income and destitute. With their home equity, they are suddenly millionaires.
I also think it’s important in networth to estimate total tax liability. I estimate my 401k/IRA at 70% value assuming 30% fed and state tax in retirement. Given the way things are going it may be higher!
Why I’m giving serious thought to liberating large amounts of 401k and converting it into Roths, keeping it low enough I won’t jump two brackets, once I can get out of a state with state income taxes.
I certainly won’t be living in one by choice once RMDs kick in.
“We can create a generation of adult kids who end up having zero motivation or self-pride to make something of themselves! Whoo-hoo!”
Or we can immediately create a class of totally unmotivated parents by taxing their estates. To be specific, those exact parents who are most likely to create new jobs by the hundreds.
“TOTALLY unmotivated” huh?
It’s amazing how people chasing wealth their whole lives, who are so successful and accomplished, can suddenly become TOTALLY unmotivated when contemplating how their estate will finally be taxed with all those taxes that were deferred all those years.
Sure, it’s nice to leave your heirs a good chunk of change, and $11+ million tax-free is pretty great! If each additional million is then taxed 40%, I’m amazed how this will TOTALLY demotivate folks…. I guess it’s pretty important to grasp for each and every penny, eh? Or else I vastly underestimate the powerful force of greed.
I’m demotivated and withdrawn already. At about $7M with the mere threat of lowering the estate tax exemption looming perhaps sometime in the future — I’m already out of the workforce. I’ve probably created about 80 full time jobs in my lifetime (some high paying) and could probably create a lot more since I’m still relatively young.
However working to be subject to 35% federal tax + 12% California + 7% Fica + the threat of having to pay another 45% at the end so I can be away from my family 60 hours a week working for 25c on the dollar is not my idea of a fun life. Perhaps you are more generous so it is yours, so when you become financially independent to are welcome to work.
You can wish I return to work all you want but I’m sorry I’ll disappoint you. Though I suspect that in your societal model you believe in the finite pie whereby the more I stay out of work the less money I make and the more is left for you? Yes, some, many many unknowns are already past the Laffer curve. You just don’t hear about them because they are not famous, they quit way before achieving fame, and are happily enjoying their withdrawal from work.
Hey friend, my net worth is approaching yours, and I’m fully FI with paid off mortgage and plenty of passive income. Just turned 50 with (probably) many years left to accumulate. So I’d encourage you not to make assumptions about me, what I believe, and what I want you to do.
Work, don’t work, do whatever you want.
My point is, complaining about estate taxes that we won’t even pay (by definition you’ll be dead) is IMHO sad, and funny. It’s supremely entitled to think that we should be able to pass on to our heirs mountains of untaxed income that they didn’t earn.
I mean, why not go full bore and start passing on hereditary titles, too?
I get that you don’t agree with me. Just sharing my opinion as a patriot.
Treasury department is certainly accepting donations from generous people like you. No need to wait for your children to do so. That way you can donate not only the 50% marginal tax when you earned the money but an additional 40%, and, why not, more.
Its MY MONEY!!! Not the governments!!!
I earned this money to take care of MY responsibilities (ie. my children and siblings). Dont be so generous with MY money!!
The top 2 reasons why people save comes down to securing their financial future and independence and to have something to pass on to their children and family. When you take one or both of those motivating factors away through high taxation or double taxation with an estate tax, at some point, it will disincentivize more and more people to take risk with their assets and be job creators.
BTW — and this should go without saying for someone as savvy as you — you are quoting marginal tax rates (35%), not the effective rate you actually pay on your earnings. You are NOT paying 35% federal and 12% state taxes on every dollar you earn. And if a lot of your earnings are from dividends and/or capital gains (as mine are), you are paying a top rate of 20% and those earnings are not subject to FICA, either. So, it is demonstrably false that you are keeping only 25 cents on every dollar you earn.
You are really exaggerating your ‘hardship‘ here.
Motivation for the extra dollars happens at the margin. I’m talking about why I I’m no longer working ie not contributing to GDP in that capacity. So that is earned income. Had my wealth been “untaxed” as you claim then my net worth would have been at least 10M now instead of 7M. So that’s is my “hardship”, 3M less. I don’t think that paying another 40% is worth it. You seem more motivated to work and earn more (though somehow you FIRED too as you say) so go ahead work and pay the tax. For me I just choose to withdraw and spend lots of time with my children, we go camping, we go fishing, I even do some taichi and have belatedly started to learn how to play the trumpet, something I’ve always wanted to do but never had time to when I was a much more significant contributor to the economy.
And my asset allocation is already distorted by capital gains taxes. For one I invest primarily internationally in lower risk higher dividend stocks. I don’t partake much in the more dynamic (and thus risky) part of the US growth economy because if I make a profit I’m taxed, while if I have a loss it’s all mine to keep, no refundable tax credits for that other than a paltry $3000 exclusion. This asymmetry makes me shy away from higher risk higher value investments.
If taxes on capital gains were increased or if step up basis at death were eliminated I’d go down to even less risk, probably concentrating more on Chinese and some other Asian government bonds.
Once you withdraw from work and meet other FIRED people, you realize that there is already an enormous amount of withdrawn idle talent out there, staying three steps ahead of the pitchforks.
Nicely stated. I’ve lost count of the times I’ve argued with people that in increase in income will not result in a lower after tax net receipt. It is only the last dollar you earn above a new higher tax bracket that is taxed at that bracket rate.
Why the sarcasm? Just try to make a thoughtful point. The person who EARNED the money (not greedy to want to keep something you earned) was motivated to make things easier for his/her heirs. They earned that high income by producing something of high value others voluntarily purchased using their best judgement. This dynamic benefits individuals and society. Greed would be people wanting that money with no exchange. Wasteful would be forced confiscation by the government who then gives people free stuff in exchange for votes. Instead of teaching envy and entitlement, why not teach people the joy and satisfaction of earning their money with energy and creativity and persistence?
I think you are (deliberately?) missing my point, which was not sarcastic.
To wit: being able to pass on $11 million to heirs ($22 million as a married couple) completely tax fee is amazingly generous of the government. It’s truly fantastic.
Complaining that any estate you will leave behind above and beyond the $11-$22 million will face estate taxes (including all the IRA assets and/or capital gains that may NEVER have been taxed) is vividly demonstrating the dark side of capitalism, i.e., entitlement and greed.
My point is not “teaching envy.” As a multi-millionaire myself, well on my way to 8-figure wealth, what do I have to be envious of? My point is the exactly opposite of entitlement: we who have been so incredibly fortunate have no justification to complain about the current estate taxes in the U.S.
I can’t believe the estate tax threshold is $11.58 million per person either.
Which means it’s probably going to go down, not up in the next 10 years. $11.58 million is a lot!
That is why at 7M I’m not thinking of returning to work. Guarantee me the 11M exclusion and I may start considering it. I’m a few steps ahead of the pitchforks.
You can not have your cake and eat it too, mate. It makes no sense for you to have people earn their money, while also believing in having heirs inherit money. If heirs inherited money, they would not have earned it. What about those who get no inheritance, but would actually know how to use the money effectively?
Considering the language used, you are perhaps uninformed on markets and economics, or just blindly trust the systems in play. I wont pretend that I would get a good faith argument from most, if any, comments from this site. But, we should consider, perhaps, a more egalitarian economic system that be able to support those who participate; thereby, allowing people to pursue their interests and enjoy freedom.
So now my new aspiration is the hit the median net worth to be a 1 percenter!
While my husband and I are in semi-retirement we are still motivated to grow our businesses and portfolio in order to create a legacy for our kids and extended family. The job market will just get more volatile, so we would love to have a family annuity that offers a universal basic income at the least. Interesting to see the 3 different levels. I feel like $5 MM would be more than enough but shooting for $10 MM and beyond assures you’ll be happy even if you fall short!
I have real trouble with the estate tax. In my view, it should be an inheritance tax. Each inheritor would then only pay taxes on what they get.
Combine that with a huge exclusion, 20 million or more in today’s dollars, and then place a very sharply graduated tax on increments over that, becoming asymptotic as it approaches, what? 500 million?
This would allow all of your money to be inherited tax-free, so long as you are willing to break it up, which is what society needs done when it gets to ridiculous levels. Beyond a certain point, unearned money is only unearned power. Those of us who wanted a system like that could have stayed in the old world with hereditary titles and lands.
“The worst thing you can do is rent for life, spend money on stupid things you don’t need and never invest in the stock market”
That is up there with Einstein‘a alleged quote regarding compound interest. Needs to go on a t-shirt. I”d buy it. Heck I’ll put it on a t-shirt and take credit. Just kidding.
If everyone adhered to these 3 ideals everyone would be better off. I’ll speculate the vast majority of people in the mass affluent / 1% sectors engage in these exact principles.
Question – any numbers on the vertical
Growth between all sectors? I wonder if the numbers would correlate with more mass affluent attaining 1%. Maybe this dynamic would account for some of the inflection point?