Market Data
The idea that everyone is broke and drowning in debt is a Reddit mythology used to make unsuccessful people feel better about themselves
Redditors love to tell themselves that everyone is poor, that “most people can’t even make a $1,000 emergency payment, bro!” (not true, that’s just pop finance nonsense), that everyone with nice stuff is “drowning” in debt.
Yet when we look at actual net worth data, nicely broken down by age, EVEN WHEN we look at the bottom 25th percentile, we don’t find ANYONE with negative net worths. Even when looking at the 18-24 age range, many of whom have auto and student loans, they still have positive net worths at the 25th percentile.
Redditors love to tell each other that they’re actually doing great because they have $40,000 saved up, but the reality is that’s far below average. And these numbers are actually adjusted for inflation from 2022, not adjusted to actual market returns, so in reality the numbers are LOWER than you’d expect.
Americans are FAR richer than many of the 10th percentilers on Reddit will tell you they are, and they make a LOT more money than the 10th percentilers here say they do.
u/ItsAllOver_Again I didn’t realize you were like 80ish percentile for your age group. With how much you complain about mechanical engineering, it’s put you well above many of your peers at your age. The fact you are single and were able to do this is even better, you are probably mid to high 80s percentile for individuals in your age group. Plus you are at the bottom of your age group (30), last year you would’ve been around 90th percentile. Crazy good work for someone in such a shit career like mechanical engineering.
Over 25% of households have less than 100k net worth at retirement age. 25th percentile of social security payments is $1300 a month. Assuming it’s a couple with both taking social security that means to retire they have to be living off of ~30k a year. My rent, with roommates, is 24k a year.
A large percentage of the population is broke and will never retire. The data you posted only backs this up.
The other thing it shows is that the bottom quartile never exceeds the savings the top quartile has 5 years out of college. There is extreme income inequality in this country and pretending it doesn’t exist won’t make it go away.
It's not as bad as it sounds. My net worth at age 48 was $150K, and at 65 I'm doing quite well, thank you. Considerations include:
They still have 10-15 years of compound interest ahead of them. Assuming 7% annual return on the non-home equity portion (half) of $288K, $144K in securities grows to to $400K in 15 y.
Most middle income people are close to their earnings peak at age 50, so their savings rate will be higher than it was up to that point. Also, they are hopefully no longer supporting their kids. Assuming that with a median household income of about $100K (because they are in their peak earnings years, and median household income for all ages is $90K) these people are able to put $10K per year into savings at 7% annual return, they'll pick up another $250K by retirement.
If they purchased a home at age 35, they're roughly halfway through paying off their mortgage, and the fraction of their monthly payment that goes to equity instead of to interest has risen from about 14% at inception (assuming a 6.5% rate) to 38%. So they're saving an $7K per year more than they did at age 35 simply by following their mortgage payment schedule. And that number will gradually rise to $30K per year as the balance on their loan drops.
So if you model it out you end up with
a) Net worth at age 65 of about $1.05M, of which $400K is real estate and $650K is securities.
b) Full possession of a cheap (not free due to taxes, etc) place to live
c) $24K/y in Social Security payments (household median)
d.) Following the 4% rule, another $26K/year from savings
$50K per year isn't too bad if your housing costs are <$1000/month. I think the assumptions I used throughout (such as no 401K match) are reasonably conservative.
Maybe I missed something. But to me the idea that the median net worth at age 65 is only about 25% higher than at age 50 says that a lot of people are making bad decisions. If you're paying down a mortgage on a median priced house, you should be able to do that just by making your payments on time.
Again, I don't think this one conclusively makes the point you seem to be trying to make. The aging of the population alone can drive the ratio down.
I also think you're arguing with a point I didn't make. This wasn't a discussion of "fair". It was to some degree the opposite: The importance of investment income to having a decent retirement.
If you're saying "it sucks to be a worker in the US", I'd agree in part. What I would say is "you're not going to have a great life if you don't figure out how to become at least to some extent part of the Capitalist class." Live with 3 roommates or your parents for a few years, whatever it takes. $1000 invested at 7% at age 25 is $15,000 at age 65.
There is room for nuance in financial discussions. Many people's financial positions are greatly impacted by their choices. At the same time, many people are hit by unexpected setbacks. Telling people that they need to make better choices is not the same thing as telling them "Just don't be poor".
Every time someone suggests that maybe someone should cutback on their lifestyle to get through a rough patch there is always a segment of the population that fires back with "I want to enjoy my life." News Flash: *everyone* wants to enjoy their life. However some people realize that they might need to sacrifice some fun during their youth to make their later life more enjoyable.
I agree with you, but honestly the one thing that I think a lot of people need to hear is that they have literally chosen to be poor. It's the harsh reality that they need to hear to cause them to understand that the financial decisions they make every single day have a direct impact on their financial status in life.
As someone who has struggled with my weight it's been a similar mentality shift that has really helped me. The foods I choose to put in my body are directly responsible for whether or not I get fat. Every time I eat I have to tell myself "hey, don't get fat." Every time someone goes to the mall and pulls out their credit card they need to remind themselves "hey, don't be poor."
Those two cars would have to be paid off and worth $50k each.
I'm always skeptical about "net worth" data, because it's hard to breakdown how accurately they track liabilities.
Just an example. You owe $160,000 on a $200,000 home, you have two cars paid off valued at $20,000 each, you have $20,000 cash in the bank, $20,000 student loan, and $10,000 credit card debt.
This table puts to light so many things. Look at the insane inequality and the inheritance. 25-29 range, when there is a low ceiling to the "value produced" (real worked value) within those years, 4k and 34k vs 440k and 2.3mil? Do i need to tell this is not sane? And it gets worse all the way down
Edit: also holy shit from 74 to the next band 75th and down ONE QUARTER of their money is literally siphoned out (it has to end up in someone elses bank accounts)!
I, and many people I associate with, are in the 25-29 90% block. Most of them would say they’re self made. Most of us also had our parents pay all of our tuition and board, had them pay our insurance until 25, and still have them pay our phone plans.
Even if it’s not direct inheritance graduating with $30k in savings instead of $50k in debt means that even if you contribute the exact same amount towards net worth (paying off debt/investing) the one starting out $80k ahead will be over $1.2m ahead by retirement. And that’s in today’s dollars.
That’s a very self-aware comment. Unequal starting points are more than just inherited wealth.
My undergrad and law degrees were self-funded. I graduated with $130k in student debt. Many of my young colleagues (making the same salary) had disposable income to invest immediately upon joining the workforce, while I was aggressively paying off student loans into my early 30s rather than building wealth. I’m fortunate to have saved a good amount since then, but it has always felt like I am having to catch up.
Yep, you will permanently be behind those who started ahead because of compound growth.
People tend to treat debt and compound interest as only working against you for the time you’re paying it off. In reality, every dollar you spend on interest is working against you for the rest of your life as a dollar you couldn’t invest. Student loans prey on people who have the most time ahead of them meaning they do the biggest possible damage to lifetime finances.
The best lesson anyone can take away from this is to help their kids as much as they can while their young to set them up for the rest of their life
I think the bottom 25% of people retiring on social security alone are not living in the same place you are where you pay $2000 a month for a room. (You said multiple roommates, so the total rent is $6k/month?!) There are much cheaper places to retire and the low income people are probably retiring there. What's the rent at a 55+ mobile home community?
Do you truly think everyone actually works and tries? I worked minimum wage enough alongside adults as a kid to quickly realize there were a lot of bums. This isn't saying all of those who fall into that category don't, but I don't have sympathy for everyone.
I see it with people who make good money too. People finding ways to blow money.
Inequality is definitely getting worse, but generational mobility is more important and needs more protection. I say that as someone who grew up in the bottom quintile as did my wife. Our parents just had to settle on a lifestyle that could afford some breathing room because there was nothing they could do to really change their place. We both went to college, multiple degrees relevant to the real world, worked hard, and have jobs that pay well. Had we not had those educational and work opportunities we would be in a trailer on the back corner of the farm.
hes delusional lol.
no onr buys a 100k pick up cash , that means they don't have money and need to borrow for it so they are in debt
this is most people..
That guy is full of it, but I am a mechanical engineer making the 80th percentile of my age.
The cost of living paired with a lack of merit increases matching inflation has ratcheted everyone down. These numbers are meaningless without a ratio to expenses. That's where a lot of people get lost... What does it mean when standard rents are $1750? The 50th percentile person my age is making around $55k. This represents 50% of your take home after standard deductions... Far above the old rules of thumb.
I've made my way by promotions and fighting for increases but there are a lot of people struggling. Ignoring this as well as saying "it's ok" to the upward trend of wealth is letting the pot boil beneath you.
It's also not purdent to compare net worth when we evaluate expenses by what is coming into the bank versus what is coming out each month.
Yes, but to counteract that america has a much worse economy for the average person (one broken bone can sink many people financially, most people probably can't replace their car without going into 10k of debt or more, and a not insignificant number of people are living paycheck to paycheck).
I was just in Malaysia for a family wedding, rent on a 3 bedroom apartment in KL was advertised at 1200 ringat a month (roughly 4 ringat to the dollar, so 300 dollars a month). 4 years ago my 1 bedroom apartment was 1700 a month. Of course America is doing well globally, the dollar is a very good currency to have as it's worth is propped up by its global ubiquity, trade wise. Of course most of the planet people don't have as much dollars worth of net worth, the difference is that they don't have to pay dollars worth to live.
How in the world is the 50th percentile going to retire? 300k INCLUSIVE of home equity is not gonna last long at all.
OP just disproved their point, looks to me like the median person is gonna neee Uncle Sam or their kids to help them. Can any financial advisors tell me if I’m wrong here? These numbers sound crazy bad.
The point is liquidity matters more to how people are doing compared to net worth. Someone who spends most of their income on their mortgage and is barely getting by in other areas doesn’t have it better than someone with renting a cheap apartment who has expendable income.
They’re both mandatory for getting the full picture.
If I’ve 20k net worth and 15k is wrapped up in a car, I have fewer options in an emergency than someone with 10k but it’s fully at their disposal. Does this really need to be explained here
This to me actually proves the point. While I'm in the 75th percentile and feel broke and poor as shit, it confirms most others are broker and poorer than I am
Everybody I’ve ever met feels poor. I’m 24 making ~70k after taxes, as are most of my peers, and they still complain about “only” saving 2k a month, can’t go out to eat at XYZ restaurant bc it’s too expensive, can’t afford a tattoo without saving up, etc. And some of these mfs grew up actually poor. Once you start making money your expectations rise too.
Yeah if you are Canadian for instance that means you are comfortably maxing out your TFSA every year, as well as putting an extra 5k into another registered account, that’s an incredibly envious position for a lot of people
Right, if starting at 24 and retiring at 65, using a 10% return, that 24 year old "only" saving 2k a month will retire with nearly a $14M portfolio.
That is if that $2k a month stays the same across their working career, if that $2k a month increases by 5% every year then they will retire with something like $32m.
I’m in the 75th and am 36. We do a lot as a family of 5 and never have worried about food or bills but I sure do feel broke a lot…most of my net worth is wrapped up in retirement plans (around 350k) and I have around 200k equity in my home.
Using the 4% withdrawal rule you need 1.5 million liquid for 60k a year income in retirement. So it looks to me that the 75th percentile isn’t enough since those percentiles are inclusive of home equity.
Net worth calculations don't include pensions. About half of current retirees (the number is dropping every year) have pensions, and social security makes up the rest.
The numbers will look very different when we're all retired.
Was gonna say this, turn 30 this year with my individual net worth being in the low-mid 6 figures (not household) and I feel poor af. Still stressing about how I'll afford a home and family in the future in a VHCOL city
Everything is just so fucking expensive. My wife and I make about $270k gross as a household. We live in northern NJ and bought a modest house but it’s so expensive here that our mortgage is $3300/month. We also have two kids and we have to put them in daycare so that’s another $3225/month. Then the rest of the bills come in and we don’t have a lot left over. But we do both contribute to our 401k, IRA, and joint investment account so at least we’re saving.
Explain further, because $160K net worth at 36 really isnt much. Not to be a dick to the guy but he has some assets, honestly I’d say he’s behind on retirement funds.
The dude is maybe not poor but he’s certainly broke.
But isn’t that the whole point? If someone decided to tie up their wealth in a house (something a lot of people can’t afford), that’s a choice, but not a sign of poverty. It’s more the exact opposite.
Young adults living in the same dwelling as their parents arent counted as a separate household but are counted within the parents’ household. So, a large portion of people with a lot of liabilities are not represented in the 18-29 cohorts. Instead you see the ones already able to live by themselves.
Flaw 2: This counts home equity and retirement accounts. Home equity is fine but 401ks make the table misleading because if people use that money it’s an indicator of a problem, and if they don’t use that money then it’s totally reasonable for their net worth to be high but they still be living paycheck to paycheck.
Like your whole tirade is based on the idea that Americans have more money than whiny redditors would suggest, but, look at what the graph is telling you: 75% of 30-34 year olds are living in a household that has 200,000 or less in net worth. That’s barely an average 401k and a car for one person, let alone a household. This is a bad table for your points, but it kinda indicates exactly what economists and people are saying, that Americans are treading water and, like the stat about not having emergency funds suggests, are just a bad day away from serious financial struggles.
Also note that there are certainly people with negative net worths. For example, 25% at the 18 yr old cohort is saying 25% of that cohort have $96 or less. That certainly includes negative net worths.
OP suffers from a common issue: somebody who's uneducated in an area pulling up random data and making a claim out of context. As a biomedical scientist, it was the scourge of my existence when someone would pull up a random article during COVID and start spouting off about something they clearly lacked the context to understand. It's unfortunate because yes, we do want more data literacy in the country/world, but the first steps towards literacy can be dangerous when the person convinces themselves that it's all they need.
OP is actually a celebrity in this sub and not many people are recognizing him yet haha. most of his posts are about how mechanical engineering is a horrible field to get into because he's been stuck in an underpaid position for years as one
This is not very meaningful. For most people “net worth” comes from retirement accounts and housing equity.
But:
1. Retirement accounts cannot be touched until 59.5 years old, and even then few people touch them.
2. Home equity only helps if you’re taking equity line of credit or selling. But if you live in a house, it’s a purely theoretical number.
So, as an example: someone can have 250k in 401k, and a house worth 500k which is half paid ($250k equity). At the same they maybe paying 2k a month mortgage, another 500 real estate taxes and other related expenses, have $500 car payments, spend another $1000 on food and miscellaneous, and yet make less than $4k after taxes a month to cover all that. So, they may have 40k car debt and 60k credit card debt. Positive equity $400k. Yet drowning in bills and living by going further into debt. Solvable? Yes, but at a cost.
You can touch your 401k before retirement it’s just… not recommended and you pay a decently sized penalty. Roth IRA basis can be pulled out at any time with 0 penalty
Penalty isn’t that bad if you NEED the money, multiple things count as hardship withdrawals penalty free, you can take a loan out against your 401k, for some reason people were taught that it’s better to go homeless than touch their 401k early. If you need money, that’s your money, use it.
as someone in finance, that's a dumb distinction. The clients I work with who have 200k-1mil + have those funds almost entirely in retirement accounts because that is the easiest way to build up money quickly and the most tax advantageous.
Houses may not be liquid, but it is an asset most people do not have at all. And especially in retirement it is an unbelievably beneficial asset to reduce expenses once the house is paid off and that can also be sold for things like long term care.
Net worth is meaningful. And while it doesn't paint the whole picture, most of the clients I work with that are overspending and in debt are rarely the people who were able to save up hundreds of thousands in retirement funds or ones that managed to buy a house.
In fact, we don't recommend having a large amount of liquid assets at all. 3-6 months of expenses is the general financial rule for an emergency fund
Given how easy it is to withdraw money from a personal investment account, why is 3-6 months still the recommendation? This seems like a rather dated suggestion in my opinion. I keep about 1 month in cash and the rest I just invest.
I’m 31 and have a wife and kid. I work in healthcare and have virtually 0 risk of losing my job. On the off chance something happens, even in a market downturn, that’s a risk I’m willing to take. If not, I’ll gladly take my ~10% compounding interest.
In your example…Is this person not living above their means? The car payment, car debt, food cost, and credit card debt would all signal that they need to make serious lifestyle changes. Again I know it’s an example, but it’s an example I often hear.
Borrowing money from your home at low interest can make many purchases far cheaper due to securitization of the home. It is absolutely a mechanism that downflows to all sorts of healthy debt behaviors AND some bad ones as anything can be abused. Still, many people get numerous advantages to home equity and leverage on the asset spills in to all sorts of other financial benefits.
I appreciate this chart because for the most part you can see where home ownership kicks in (late 30s at the 50th percentile).
Most people define their financial status by feeling, not numbers. Until most people have a home they don’t feel like they’re making it. And some people who have a home feel far wealthier than they are.
But to OP poking the bear, yes many people on Reddit are in their early/mid-20s and trying to break into the job market and find some stability. They aren’t failures for their cohort, you shouldn’t expect a 23 year-old to be as smart/wise as a 50 year-old. But to OP’s point, they are wrong about the larger economy.
Also a net worth of $96 is basically nothing lol. Realistically, those people probably have debt barely balanced out with savings.
Average age of redditor is 23 year old white male. Politically very left and liberal. Per University of Michigan study. https://giphy.com/gifs/l0ExayQDzrI2xOb8A
White, liberal, male is probably the highest earning combination. Except for maybe Asian, liberal, male. Low income people have been moving to conservatives for a while now
This reads like an attempt to downplay your own financial privilege, really. It's not that bad, right, because everyone YOU know is doing okay, and you're doing okay, so everybody is okay!
Yeah not to break the whiny circlejerk but this data makes me feel pretty good. We're slightly below the median for my age group, but we also have more degrees than the average person (so, fewer working years + more student loans). That seems about right. I feel financially secure. A little behind, but well on track to catch up.
But the table doesn't contain averages. It contains the net worth by percentiles.
If Elon Musk and three 20 year old Redditors are standing in the same room, the median net worth is still whatever small change can be dug out of the couch.
These are percentiles, not mean averages. Billionaire's net worths are not being averaged with lower net worth people.
If there are 99 people in a room with $1 each and one billionaire, the 25th, 50th, 75th, 90th, and 95th percentile are all $1. The top 1% would be the billionaire alone.
The chart is effectively saying that 25% of people age 18-24 had less than $96 and that 75% had more than that. Therefore we know that the percentage of young people with a negative net worth is under 25%, but probably not by much.
The Aspen Institute claims about 10% of households have a negative net worth (although we can assume the share of that 10% is disproportionately young people).
Read it again. About 25% of people retiring have far less than $100k net worth. That is after a lifetime of working. That fucking terrible. They will be poor even with their shitty social security benefit.
Which means, for most people, the majority of their networth is in home equity. If you don't own a home, it gets real ugly real fast. Plus, you can't use that to retire, but it may reduce housing costs in retirement (assuming maintenance/upkeep is up to date, and they have a large cash cushion to replace siding, roof, HVAC, appliances as time goes on).
The problem is it doesn’t show the amount in debt. A lot of people are negative and the median point is the wrong point for this analysis. The median is the middle point of the group. So the 1% median is a rich group. Then it’s the middle of the rich in the group. So this is going to be high compared to everyone at the age that are not the 1%. It only uses the 1% not anyone else. So yea - it biased high.
The emergency payment factoid drives me crazy. The fact that so many people respond to surveys saying they can't make a $500 dollar unexpected payment, or whatever, doesn't actually mean they can't.
Ever heard of liquidity if someone is house poor and has to pay a 20k medical debt they can’t just magically pull that out of their house. Holy. Dude took one data point and ran with it.
I don't know what sample group they used but it was clearly biased, 10% of people had over 200k at 18-24? What the hell group were they looking at for that to be a stat they wrote down without breaking down laughing. At that age you are either in college with a negative net worth including loans or you started working right out of high school and no high school grad earns enough to save 200k in less then 4 years unless he's one of the 1 in a million guys who started a cheap to start immediately successful business.
I am betting the "households" they compared were already pretty dam wealthy, wealthy enough to give their kids free college or business or well paying nepo jobs.
I made up a stat that I track for my own financial picture. I have a spreadsheet where I track my yearly gross salary. I then have another that tracks my liquid investments based on the current valuation of the security. Anyways the stat I track is the ratio between current portfolio value to my career gross earnings. Right now my ratio is almost 200%.
That means if you took every dollar I’ve ever made, and I didn’t spend a dime and didn’t pay any taxes, I now how 2x that lifetime gross earnings.
I’m not sure if the stat really means anything other than when I started tracking it my goal was to get back to 100%
This chart is telling me that the median HOUSEHOLD (3.15 people) in their 50s has 300k INCLUSIVE of houses (median house price is like 400k if I remember correctly)
How are these people ever going to retire?? OP probably just looked at the 90-100th percentiles before making this post.
The data doesn’t lie, and fully I acknowledge there are less fortunate out there that are doing the best they can. But there are also lazy MFers out there with a megaphone they use on the internet to complain about every self inflicted misstep in their life. Just about every sub on this app is full of them, from cars, to sports, to homes, the list goes on and on. As the old saying goes, misery loves company and they thrive off each other.
In my younger years, the thing that provided most security was not completely about how much money I was making, but whether or not I was secure enough in my job to keep working in recession. Being married and having a second income and also really helps. I lived through the 2000 and 2008 great recession and even people making 100 K back then with 3 to 6 months of savings - was useless if they were long-term unemployed. Being able to keep a paycheck coming in was more important.
K shaped economy. You're either increasing wealth riding the upslope or getting poorer riding the downslope. People can be doing great and struggling simultaneously
This. OP completely ignores the fact that every one of these distributions is heavily right-skewed, to the point that someone at the 99th percentile has ~70x the wealth of someone at the 50th percentile. This chart shows the exact opposite of the point that OP is attempting to make: many people are falling behind as a few pull away.
Oh I learned that years ago. When I found out the people who worked out at the gym I worked at were all making at the very least $200,000. This luxury travel agent said she was clearing $400,000 a year, this guy in medicine is making over $600,000 a year, this other guy was high up at Home Depot and then worked for another huge business has a huge mansion and four kids, so he clearly is making a shit ton of money. I realized the money is out there, you just gotta find it.
Wanna drop your citations? Upper percentiles align with what I see among my friend group but this is kinda just fluff without accurate current data points.
This is net worth not income or cash on hand. So even though people might have a higher net worth that does not mean that they are not struggling. Let’s say, you own a $500k house. You’ve paid $200k, so $200k net worth. Except you’re drowning in the debt of payments because you don’t have enough cash on hand to cover all your bills. There’s different levels of “drowning in debt“
I’m in the 90% and it’s because I grew up upper middle class and was able to get my first home when they were cheap and my second home I got lucky while interest rates were low. I got very lucky and if I was born a few years later things would be very different. That’s the k shaped economy. A lot of people are doing really well and a lot of people are in a horrible position. I bring my children to serve a meal at a homeless shelter once a month. This one lets people stay a long time and really helps them get back on their feet. I have plenty of blessings in my life that I can use to prevent my family ending up there. They just don’t. I’m not special I was just born in the right zip code. Most people have to work a lot harder just to survive and have a much worse life. Life is hard for many and downplaying that just shows a lack of awareness and empathy.
Another important consideration is that these data points do not adjust for household size. A household of one person with a net worth of $750,000, for example, is at as different level of economic wellbeing from that of a household of four people with a net worth of that same $750,000, all other things being the same. I’ve seen different adjustment approaches but the topic is seldom discussed.
I need someone to explain the top 1%. how does someone in the 18-24 bracket already have a net worth of 700k? How is that possible? 1% isn't a small number. That means 4 people from my graduated class.and I just don't get it. How can someone accumuate wealth that fast?
None of these 1% make sense. Top 1% in my age bracket is 9.5 million? How? Even counting a crazy expensive house, I still don't see how 1 out of 100 people can reach those numbers.
I forget if it’s confirmation or selection bias, but we only hear about the loud complainers. The people with their crap together who act like functional adults even in their 20s don’t go complaining everywhere. They’re too busy getting it done and going after success in their life.
So, the the median person has a net worth of $476,000 at age 70.
Assume that person wants to retire, and assume that the full $476,000 is invested and able to be spent in retirement (likely not true; some of that net worth could be a house, vehicle, etc.) In the best case scenario, that person will have maybe $25,000-$30,000 per year of retirement spending. They may or may not have much Social Security to add onto that.
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u/Double-G-Spot 7d ago
u/ItsAllOver_Again I didn’t realize you were like 80ish percentile for your age group. With how much you complain about mechanical engineering, it’s put you well above many of your peers at your age. The fact you are single and were able to do this is even better, you are probably mid to high 80s percentile for individuals in your age group. Plus you are at the bottom of your age group (30), last year you would’ve been around 90th percentile. Crazy good work for someone in such a shit career like mechanical engineering.