The middle class reflects the economic resources of a family, whether through income or wealth. Many specialized sources use income to define the middle class. For example, the Pew Research Center defines the middle class as households earning between two-thirds and double the median household income in the United States. This ranges from $45,014 to $134,502, using the median household income in the United States for 2020, which was $67,521.
There is an important note when using income to define the middle class: it does not take into account the assets that the family owns, such as real estate or investments. For instance, many retired households may have a high net worth but modest household income. They don’t need a high income, as their homes and cars are often paid off, and they don’t need to save for retirement.
How is net worth calculated?
Net worth is a measure of wealth: It is the total of all assets owned by the family minus the total of the debts owed.
Typical assets include:
- Net equity in housing, which is the resale value of your home minus mortgages and selling costs
- Resale value of your car minus the outstanding loan value on it
- Financial assets, such as retirement accounts, savings, and cash
- Resale value of household items, such as consumer electronics, jewelry, or art
Liabilities include significant amounts like mortgages, car loans, and student loans. They also include medical debts and outstanding credit card debts.
How is the average net worth of the middle class calculated?
Many government agencies calculate and report on net worth. To understand these reports, one must first understand what averages and percentiles mean.
Averages
Practically, there are two types of “averages”: the median and the mean. The median is the middle point in a range of statistics, arranged in order. For example, in the list of numbers 8, 10, 13, 20, and 40, the median is 13 because it is exactly in the middle of the five numbers.
The mean is determined by adding the dataset and dividing it by the number of statistics in it. For the same range, the mean is (8 + 10 + 13 + 20 + 40) / 5 = 91 / 5 = 18.2. This is the number we usually think of as the “average.”
In terms of U.S. wealth, the mean or average gives an inflated number due to wealth concentration at the top of the range. As a result, the median provides a better understanding of the actual U.S. average than the mean.
According to U.S. Census data, the median net worth of American households in 2019 (the latest available data) was $445,900. The mean net worth was $118,200. This is a very large gap and shows how wealth concentration among the wealthiest households can distort the average.
Percentiles
The U.S. Census Bureau uses percentiles to delve deeper into national net worth. A percentile is the fifth of a group, just as a quartile is the quarter of a group. Dividing Americans into five income groups allows for a more detailed examination of the middle class.
Note: The lower wealth percentile is the segment with the lowest net worth. The upper wealth percentile is the wealthiest 20% of households.
The lower percentile tends to include younger families that do not have much education. Younger cohorts haven’t had a real opportunity to accumulate wealth, and there is a positive correlation between education levels and wealth levels. The upper percentile usually has a higher proportion of older families and those with more education.
The middle class is often defined as the three middle percentiles. Some classify this group into subcategories which are the lower middle class, middle middle class, and upper middle class. The table below shows the average net worth of these percentiles:
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| Percentile | Definition | Net Worth | Average Net Worth |
|---|---|---|---|
| Lower Fifty | Poverty Level | $6,030 | |
| Next Fifty | Lower Middle Class | $43,760 | |
| Middle Fifty | Middle Class | $104,700 | |
| Next Fifty | Upper Middle Class | $201,800 | |
| Upper Fifty | Wealthy | $608,900 |
Note: If your net worth is between $43,760 and $201,800, you are in the middle class.
Average Net Worth by Age
Net worth increases with age as households accumulate assets over time, including property, cars or other means of transportation, and retirement savings. As shown in the table below, wealth peaks at retirement age and then decreases as retirees spend their assets.
| Age Group | Average Net Worth | Average Net Worth |
|---|---|---|
| Under 35 | $15,700 | $98,220 |
| 35-44 | $83,150 | $282,100 |
| 45-54 | $139,200 | $467,500 |
| 55-64 | $203,900 | $582,700 |
| 65-69 | $266,400 | $690,800 |
| 70-74 | $305,100 | $738,600 |
| 75+ | $249,500 | $633,400 |
This illustrates how much higher average net worth is, regardless of age. This is due to the concentration of wealth in richer households.
Average Net Worth by Education
Education is strongly correlated with net worth, as shown in the table below. Those without a high school diploma have about $5,090 in average net worth. This value rises to $40,560 after obtaining a high school diploma. This wealth doubles to $196,800 after earning a bachelor’s degree. This amount doubles again to $408,700 after obtaining an advanced degree. The average value is provided for comparison.
Source: https://www.thebalancemoney.com/american-middle-class-net-worth-3973493
Comments
| Education | Average Net Worth | Average Net Worth |
|---|---|---|
| Without a High School Diploma |
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