Here's the Net Worth and Income You Need to Reach the Top 10% of American Households

The Federal Reserve conducts its Survey of Consumer Finances (SCF) every three years. The SCF provides a financial snapshot of American households across demographic and economic groups, detailing their asset ownership, debt burden, and income.

The 2022 SCF (the most recent installment) was published in October 2023. American households reported a median income of $70,200 and a median net worth of $192,700. For context, median refers to the middle value, or 50th percentile, meaning half of surveyed households reported more income and wealth, and the other half reported less.

To rank among the top 10%, or 90th percentile, American households needed to report a minimum income of $248,600 and a minimum net worth of $1.94 million. However, those figures encompass adults of all ages. Readers who want to benchmark their financial status against that of the broader population should focus on their specific age group.

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Income: The top 10% of American households by age

The chart below breaks down the before-tax income by age required to rank among the top 10% of American households. The age groups listed in the chart refer to age of the reference person, defined as the male in mixed-sex couples and the older individual in same-sex couples.

Data source: Federal Reserve 2022 Survey of Consumer Finances. Amounts are rounded down to the nearest $100.

Net worth: The top 10% of American households by age

Net worth equals assets (financial and nonfinancial) minus debt liabilities. The most common financial assets reported by American households in the 2022 SCF were bank accounts (98.6%), retirement accounts (54%), and brokerage accounts (21%). The most common nonfinancial assets were vehicles (87%) and primary residences (66%).

More than three-quarters of American households reported having debt. The average balance was $163,800, and the most common sources of debt were credit cards (45%), vehicle loans (35%), and student loans (22%).

Data source: Federal Reserve 2022 Survey of Consumer Finances. Amounts are rounded down to the nearest $100.

You can increase your net worth with prudent budgeting and smart investments

Some readers may be disappointed or even embarrassed by how their net worth compares to that of their peers. I would remind those readers of two things. First, ranking among the top 10% is difficult, and individuals toward the older end of the defined age groups have an advantage, simply because they've had more time to work and save.

Second, anyone can increase their net worth via prudent budgeting and smart investments. Financial planners often recommend the 50-30-20 budgeting framework, which breaks income into the three spending categories discussed below.

• Needs: 50% of income should be allocated to necessary expenses like groceries, gas, rent, and utilities. Minimum debt payments also belong in this category.
• Wants: 30% of income should be allocated to discretionary expenses like travel, entertainment, and luxury purchases.
• Savings: 20% of income should be saved for retirement through individual accounts and/or employer-sponsored accounts. Debt payments above the minimum also belong in this category.

Notice that minimum debt payments are included with "needs," while debt payments above the minimum are included with "savings." There is an important caveat. Payments on high-interest debt (debt bearing an interest rate above 8%) take priority over saving for retirement. Money invested in stocks may not compound at 8% annually, meaning the balance on high-interest debt could grow faster than invested dollars. Avoiding that situation is imperative.

After paying down high-interest debt, financial planners generally recommend paying down other debt gradually, while simultaneously saving for retirement. In general, workers should contribute enough money to employer-sponsored retirement plans to earn the full company match . But any additional money should be invested through an individual brokerage account, simply because they offer more flexibility.

Historically, the stock market has been the best place to invest money over long periods, and an S&P 500 index fund is a good place to start. The S&P 500 is essentially a benchmark for the entire U.S. stock market. The index outperformed almost every other asset class over the last decade, including international equities, fixed income, precious metals, and real estate. The S&P 500 also beat the vast majority of professional money managers over the last decade. In that context, an S&P 500 index fund is a great option for most investors.

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