Average American Household Hits Millionaire Status—How Do You Compare?
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For most people, the idea of becoming a millionaire is the kind of fantasy that fuels grueling work schedules and dedicated financial planning . But lately, some may feel like the dream of breaking into the seven-digit tier of wealth is more unattainable than ever in the face of economic uncertainty. However, surprising new data shows that the average American household has hit millionaire status. Read on to see what’s fueling the change and how your net worth compares to the rest of the U.S.
RELATED: IRS Announces Major Tax Filing Changes for Next Year—Are You Affected?
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Even when it may feel like there are fiscal headwinds, it’s still possible to generate wealth in surprising ways. Now, new research shows that the net worth of the average American household has broken into the seven-digit range, reaching $1.06 million in 2022 when adjusted for inflation, according to the Federal Reserve’s consumer finance survey published in October.
The latest figures also show there’s been a significant jump in recent years. In 2019, the national net worth average for households was $868,000, marking a 23 percent increase in the years since the COVID-19 pandemic began, Fortune reports.
While especially high or low figures can skew averages, a deeper dive into the data still holds relatively good news. The median net worth in the U.S.—which is determined by the middle number when a data set is placed in order—was still $192,900. This represents a 37 percent increase after inflation in three years, per Fortune .
Of course, this shows that the distribution of wealth is pretty top-heavy in the U.S. The Federal Reserve data shows that the top 10 percent of wealthy people in the U.S. have an average net worth of $6.63 million, while the bottom 10 percent had an average of just $5,300 in 2022.
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Even though it’s often easy to measure your wealth by the amount of cash you have on hand, there’s much more that goes into determining your overall net worth . Essentially, each person’s is determined by the amount of value they hold in assets—which includes cash, investments, property, retirement accounts, and valuables—minus any debt and liabilities, according to CNBC.
However, these calculations can sometimes lead to misunderstandings about a person’s living situation . For instance, someone may be shown to have a high net value thanks to an expensive property they own but might have very little cash on hand to float their lifestyle, according to personal finance company NerdWallet. This can also make the number easier to digest when comparing yourself to others or setting financial goals.
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So, exactly how is the wealth spread out in the U.S.? Unsurprisingly, the Federal Reserve’s survey shows that net worth tends to increase with age up until a certain point. Heads of families under the age of 35 form the lowest bracket, with an average net worth of 183,500 and a median of $39,000. There’s then a significant jump to the next older age cohort of those between 35 and 44, with an average net worth of $549,600 and a median of $135,600.
Households headed up by people between the ages of 45 and 54 fell just below the millionaire mark, with an average of $975,800 and a median of $247,200. Those approaching retirement age between 55 and 64 are even wealthier, averaging $1,566,900 in net worth and a median of $364,500, per the Federal Reserve’s data.
The list tops out with the 65 to 74-year-old cohort, reaching an average of $1,794,600 and a median of $409,900. Those 75 and older see the only decline but still tend to stay above the millionaire threshold, averaging a net worth of $1,624,100 and a median of $335,600.
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While the impressive increases in Americans’ average net worth might seem contradictory to the economic realities of everyday life, data shows there’s still a relatively straightforward explanation. Namely, an explosion in home values brought on by the pandemic-era surge in house prices has pulled up the average considerably, Fortune reports.
In fact, there’s a vast wealth gap between property owners and the rest of the population, with homeowners averaging $1.53 million in net worth versus the renters’ average of $155,000. The increased hurdles to homeownership have also arguably made it harder for those trying to improve their wealth: Federal Reserve data published earlier this year found that 65 percent of renters have held off on buying because they don’t have enough cash on hand for the downpayment on a property, Fortune reported.
However, despite the increase in the national average, not all numbers are heading up . An annual wealth report from UBS found that the number of millionaires in the U.S. actually dropped by 1.8 million people from 2021 to 2022, bringing the total to roughly 22.7 million, per Fortune .
- Source: https://www.federalreserve.gov/econres/scfindex.htm
- Source: https://www.federalreserve.gov/publications/files/2022-report-economic-well-being-us-households-202305.pdf
IRS Announces Major Tax Filing Changes for Next Year—Are You Affected?
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The fact that we have to pay our taxes every year is one thing that famously never changes. And while there are plenty of different tools to help you file , it’s more often significant changes in your own life that can alter the process. But now, the Internal Revenue Service (IRS) has announced a set of major changes for next year. Read on to see if you’re affected by the latest updates and what it could mean when it comes time to file.
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Typically, any change in the tax rate is a development that tends to grab plenty of headlines no matter which way it’s heading. But while those numbers will remain the same the next time you file , the IRS has released an updated set of tax brackets for the 2023 tax year.
The adjustments affect where the boundaries are set for each income level, with progressively increasing rates as amounts increase. This year’s changes take into account inflation, with upper limits that are 7 percent higher than brackets in 2022, Forbes reports. And while deductions and other elements must still be factored in, these brackets can help estimate roughly how much you’ll pay when it comes time to file.
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So, how much will each group now pay? The lowest tax bracket begins at 10 percent for individuals with $11,000 or less in taxable income—or $22,000 for married couples filing jointly. It then ranges from 12 percent for individuals making between $11,001 and $44,725, 22 percent for those with $44,726 to $95,375 in taxable income, and 24 percent for individuals earning between $95,376 to $182,100.
The new rate for individual income between $182,101 and $231,250 is 32 percent, while people earning between $231,251 and $578,125 fall into a 35 percent rate. It tops out with those who take in $578,126 or more in 2023 paying 37 percent. The complete list of updated brackets and rates—including those for married couples filing jointly or separately—can be found on the agency’s website.
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But it’s not just your income bracket that could be changing for this year. In a press release on Oct. 17, the IRS also announced that it would begin rolling out its free tax filing program known as Direct File during the 2024 filing season for certain taxpayers.
The service aims to provide an affordable alternative to tax preparation services many people use to file annually. It’s estimated that Americans spend an estimated $11 billion each year nationwide for professional assistance, CBS News reports.
However, not everyone filing will be able to use the service right away. The agency specifies that eligibility will be limited to “taxpayers with relatively simple returns,” targeting those with specific income, credits, and deductions, according to the press release.
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Besides individual limitations, where you live could also keep you from using Direct File next year. The IRS said the free program will be available to eligible residents in Arizona, California, Massachusetts, and New York, where state governments have worked to incorporate their own taxes into the new system. Those who live in one of the nine states that do not collect state income tax—Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming—could also qualify.
Despite its limited initial reach, officials hope the early rollout will reach at least several hundred thousand taxpayers , CNN reports. The initial phase will also help work out any issues and see if the program could be expanded to a broader pool of potential filers.
“The plan is to roll it out in increments that get larger and larger, consistent with how products like this are rolled out in the private sector,” IRS Commissioner Daniel Werfel told reporters during a call, per CBS News. “We want to make sure it is an easy-to-understand pilot.”
