The standard American household is now a millionaire, according to the Fed | Hacker News Reader

The standard American household is now a millionaire, according to the Fed

fortune.com

33 pointstempsy109 comments

Please. The amount of sensationalization here is beneath HN. This is average which we all know is incredibly skewed towards high net worth individuals. The median (much more representative of the "standard" qualifier) net worth of an American household is far, far lower.

"The average depth of this lake is 2 feet" --Said the wading man moments before his drowning death in a 20 foot deep hole.

As per the article, median net worth is $192,900.

That's a lot higher than I would've thought.

I wonder if negative net worth is included in the mean and median calculations, or if it's clamped to 0.

You don’t need to clamp for the median (unless you mean to exclude them from the dataset entirely, which is almost surely not done).

Headlines like this are to keep the masses who are far far below the $1M mark pushing hard to finally* make it.

* A carrot they'll never get by hard work alone.

Some are old enough to remember (reruns of) a TV show from six decades ago called "The Millionaire".[0] In each episode, a surprise, life-changing gift of $1M from an anonymous private donor was made to someone not expecting it. That would be $11M in today's dollars, so the status that goes with being a millionaire has been greatly devalued (no surprise).

[0]https://en.wikipedia.org/wiki/The_Millionaire_(TV_series)

This is why I wonder if 401Ks will just turn into a dog chasing its own tail. I think today, they still hammer that you need to have 1 million in your 401K when you retire, something being said my whole working life.

I feel like we've moved on from the 1M figure. 3M seems to be the new target, at least that's what I hear the most.

And yet the contribution limits are hardly changing. And your options to contribute beyond the standard limit varies from employer to employer.

Agreed, what's the limit on an IRA lately? 6k a year?

Yep. If you want to retire on a 401k alone, you have to start putting money in it as close to the day you are born as possible.

If I get to have a kid I'm opening them a Roth IRA and putting all the money that I possibly can into it.

$10,000 on the day they are born would be somewhere in the $250,000 - $1,000,000 range (depending on whether they average 5% or 7%, and if it were to average 10% it would be $6.47 million at age 65), assuming no further investments were made on it and that there were no management fees attached to it, and that somehow they could resist the temptation to draw down from it early to buy a house or pay student loans, cover debts, etc..

Note that IRA contributions require earned income so IRAs are effectively unavailable to kids until they're in their teens.

I don't think you can do the IRA, but yeah, this is the way to do it. Event if you put just a few hundred in per month, it'll grow to a sizeable amount in 65 years. That means if your kids never put in more than the company match, they'll still have a pretty decent amount at retirement and have more money each month for rent or house payment.

I will speak with a CFP/CFA before I go about willy-nilly throwing sizeable amounts of money at something. I would probably also put the account into a trust that would prevent them from drawing down until they are 55 unless they are injured or otherwise have a desperate need that is more urgent than their retirement, like their child has an expensively treatable disease or something.

Because they want us constantly working not retiring.

It really all depends on how much you want to spend in retirement. But, yeah, 1 million at 4% is 40K before taxes. The next thing you have to do is decide if you want to assume SSI will be around at your retirement. But if not, can you live on 40K per year?

When they have to re-introduce the US $10,000 bill, I hope they keep it just like the 1928 design. It's a cool design, and much better than anything since.

https://en.wikipedia.org/wiki/File:US-$10000-FRN-1928-Fr-223...

I am sorry, US bills (this 10k bill included) are the opposite of cool. Dutch pre-euro bills (Antilles included) are where it's at.

They’re both cool, they have different appeals. The Dutch bills are like an art house rendition of what hipsters would want to earn and spend, the US 10,000 is like “NYC, big buildings, big cars, capitalist empire” chic.

Is it the back side that you appreciate in this design?

I guess it’s all subjective, but I feel like it’s a missed opportunity to have more highly detailed “engraving” style art.

Based on absolutely no artistic expertise, I really like the framing of the front and back of the 50:

https://en.m.wikipedia.org/wiki/United_States_fifty-dollar_b...

EDIT: It seems there’s an alternate backing to the Salmon P Chase 10,000: https://en.m.wikipedia.org/wiki/Federal_Reserve_Note#/media/...

My favorite design is the reverse of the current $2 bill.

Clickbait unfortunately, this is median not mean. If you check the source data[1], 1m net worth is at roughly 90th percentile of US households.

Also interesting in the original survey - for the median household, over >80% of their wealth is in their house (and 2/3s of households have houses). Whereas stocks are mostly the domain of the wealthy.

[1] https://www.federalreserve.gov/publications/files/scf23.pdf

>this is median not mean. If you check the source data[1], 1m net worth is at roughly 90th percentile

I think you stated it backwards. Median is 50th percentile.

"mean not median" is what I believe gp meant to say

Nice data set.

> Debt secured by residential property was about unchanged between 2019 and 2022. About 42 percent of families in both 2019 and 2022 had debt secured by their primary residence, and the median amount of this debt decreased by less than 1 percent to $155,600 in 2022.

Man, everything is skewed by all the old folks that bought their houses decades ago.

Not arguing the truth of that statement but I don’t see the connection between the quote and it.

It's the first third of the article too.

They give the median as $192k, which is higher than I would have guessed (but probably mostly house?)

How can it be the median if it's the 90th percentile?

I think they got the two backwards.

A 10x difference between net worth MEAN and MEDIAN is incredible. Then separated by race, we see the staggering effects of past inequality.

The most important part is this article is that this is the mean.

The median net worth is $192,900 (as per the article).

This just shows there is an extreme wealth disparity.

An interesting observation is that if 99% of the wealth is held by 1% of people, and currency/wealth is only valuable insofar as people recognize ownership, if everyone just stopped recognizing ownership and we redistribute everything equally, 99% of people would stand to double their wealth on average

Wouldn't that wealth become worthless if nobody recognized ownership though?

The idea would be to not recognize the past wealth and start recognizing the new redistributed wealth

The interesting thing about that is that it's actually independent of the current wealth distribution I think, i.e. you could allocate any arbitrary amount to each person.

99% of the people would double their currency, but probably lose all of their wealth because trust in the currency would be absolutely destroyed. Yay!

Thank you dear trillionaires for bringing up the average!

If inflation keeps up we'll be billionaires soon

Nothing terrifies me more than waking up a billionaire.

Enjoy it while it lasts! What usually happens is they lop off all the zeros and print new notes. https://www.npr.org/templates/story/story.php?storyId=463206...

Nick Maggiulli breaks down the numbers better in "What is the Average Net Worth by Age?":

> So what is the median net worth of all U.S. households in 2022?

> $192,700.

> This is about 1/5 of the average net worth and an inflation-adjusted increase of about $50,000 since 2019 when the median net worth was $141,145.

> But, once again, these figures don’t adjust for age, arguably the most crucial variable we need to control for to do a fair comparison. So, let’s do this now.

* https://ofdollarsanddata.com/average-net-worth-by-age/

Those numbers make this paper net worth increase seem so ridiculous. Did the median American really become 36% richer since just before the start of covid?

I suppose you could argue people spent less and were able to pay off a lot of debt. I suspect more that a housing correction is overdue, although it remains to be seen if this will take the form of housing staying flat while inflation nibbles away at the real value or an actual price drop.

So inequality is so bad it makes mean numbers inaccurate to a 5x degree. That’s the real headline. Not this BS

Musk is currently worth $228.5B

So, he alone takes care of average net worth of over 229K households.

I would gladly fill that role if the Fed would also lend to me at zero interest indefinitely while I invest the proceeds into the economy

Nick Maggiulli breaks down the numbers better in "What is the Average Net Worth by Age?":

> So what is the median net worth of all U.S. households in 2022?

> $192,700.

> This is about 1/5 of the average net worth and an inflation-adjusted increase of about $50,000 since 2019 when the median net worth was $141,145.

> But, once again, these figures don’t adjust for age, arguably the most crucial variable we need to control for to do a fair comparison. So, let’s do this now.

* https://ofdollarsanddata.com/average-net-worth-by-age/

All these stats really tell you is:

- how expensive housing is in that country - how privatized pensions are in that country

For instance, Australia has very high wealth per capita. But that's mainly because:

- housing is extremely expensive - pensions are extremely privatized (via the superannuation system)

So it's actually a measure of dysfunction in many ways.

> The standard American household is now a millionaire, according to the Fed

In related news, chocolate rations are up.

Bad news for me with negative net worth.

What this does say to me, tho, is that with better economic policy, taxation, etc. Everyone could live comfortably.

Self Own.

Somewhat off topic, but if you filter by the 'Other lines of credit' distributed by 'Percentile of income' there is a MASSIVE spike for the top 10%. Wonder if this is bad data or a result of the loans given out in 2022.

Silly inflation misunderstandings aside - the median net worth seems more relevant which they peg at $192k. Seems about in line with what I expected.

Even then, that median net worth figure includes paper gain on primary home value.

But homes are very illiquid because of mortgage rate changes and most scenarios where people can actually draw cash out of primary housing require some major change in lifestyle since both rents and replacement homes mostly track those same paper gains.

This report is mostly “see, things are great! Please please please don’t panic!” spin.

Wealth does not need to be liquid to be wealth. Particularly when that wealth is a claim to not to have to pay rent, the biggest single expense of nearly every non-home-owning household.

The problem isn't that the wealth is illiquid. The problem is that housing wealth incentivizes behavior to turn housing into a zero-sum problem and thereby drive up the cost of housing, to the benefit of current homeowners at the express cost of all future generations and non-owning workers right now.

This report is an annual survey with published methodology and unsurprising results. Why does everything involving the Fed turn into a conspiracy theory? You can see exactly the composition of the increase in net worth, there's no secret motive to publishing this report that they always publish - it's just survey data.

The dataset is actually really interesting: https://www.federalreserve.gov/econres/scf/dataviz/scf/chart...

> Why does everything involving the Fed turn into a conspiracy theory?

Because they are a secretive cabal of elites who have some control over the economy.

Or maybe because they keep telling us "the economy" is great but most people's day to day lives are worse and we can tell when someone's lying to us even if we can't quite pinpoint that lie.

Most people's day to day lives are worse? Whose? By what metric?

In an age of mass propaganda, of all the people who are lying to you for their own purposes, why in the world would you think it's the Fed?

So if all that paper gain doesn’t mean anything because it’s not liquid then I guess people wouldn’t mind if it suddenly evaporated right?

Everyone seems very focused on the (illuminating) distinction between median and mean.

Are we maybe not thinking enough about there’s some level of difference between the two that’s a real issue?

http://www.paulgraham.com/inequality.html

A rare miss. pg doesn’t completely fuck up almost ever, I think that essay is tied with calling Altman a successful first-time founder for “even pg blows it sometimes”.

I disagree. This is a spot on article.

If you celebrate diversity in humans and their activities and thoughts, then expect diversity in wealth.

Irrational otherwise.

No one (sane) is arguing for a Gini coefficient of zero. Some people are going to have more money.

But the false dichotomy that Randian villains use is that it’s either that or fucking go wild.

Vast wealth inequality is almost synonymous with capture.

Rich people capturing the levers of society and then advantaging their dumbass kids and friends is like, what actually happens.

The diversity poetry is a crinkly piece of tin foil everyone is supposed to look at while the profits get privatized and the losses get socialized.

I’m all for capitalism if we can figure out how to do it without connections and shit being what really matters.

But everyone who touched Loopt should have gone bankrupt, not like, take over the world.

I'd say plenty of people are thinking about wealth inequality, and the mean/median discrepancy is one of many relevant statistics.

Are you trying to say that an equitable wealth distribution would make mean and median across the population the same? This is a very specific statistical conclusion that is hard to grok without unpacking some of the assumptions behind it.

I’m saying that a healthy-ish Gini coefficient seems to be in the 0.2-0.275 type range, and a warlord won’t die in his bed above 0.85.

It’s hard to get figures on us, but I used to get drunk with a bunch of Goldman quants who said we’ve been north of 0.5 once you cut the shit since 2008.

It’s neither widely known nor considered polite to point out that the 5 ish mass shootings a day in the US make it per-capita more dangerous than Syria.

So if you’re asking if I’m saying fuck rich people who exploit capture?

Yeah: fuck them in particular.

I don’t disagree but it’s an obtuse way to make a point.

Haha fair play.

HN is in general the best thing on the Internet but the number of people who stand with Greenspan, Rubin, and Summers on knee-capping Brooksley Born because they think the Ayn Rand car looks cool is like, very high.

So I generally try to start that conversation in a roundabout way.

I guess I’m ornery today. Objectivism is fascism clotted with purple prose written by a welfare recipient.

Prove me wrong ;)

The distance between mean and median doesn’t tell you much. For any distance between the two, including them being equal, you can fit a great many very different distributions. They are indicative but the underlying distributions matter a lot.

You are obviously correct in a general statistics sense.

But I’m not sure that density functions give off more light than heat about this impending tennis court moment.

In my city they have different tent camps for people who just got fired.

Where's my million?

If you own a house, probably there. If you don't own a house, possibly retirement. If you have neither.... well.

I have a pension.

I remember when I was a kid 100k was a lot of money.

Now 1 million is all right.

And I believe those numbers typically don't include the value of pensions. The Net Present Value of a solid pension is well north of a million.

On average, Americans have less than two hands.

I can't access the article, but since median household wealth is much lower, the Fed estimate must be imputing the value of future Social Security and Medicare benefits. If you are credited with future government benefits, shouldn't you reduce that by an estimate of future taxes you will pay? Otherwise the federal government announcing that Social Security benefits are being doubled would drastically raise the net worth of households, which is unrealistic.

This is just mean ($1.1m) vs median ($0.2m) confusion. The underlying data are here: https://www.federalreserve.gov/econres/scf/dataviz/scf/chart....

The article title is misleading then.

I think it's profoundly misleading to call the mean the "standard" when it deviates so much from the median, but I guess they don't.

two hundred thousandaire doesn't roll off the tongue as well

My gut says that this is related to real estate, where most Americans have much of their wealth, which has seen price increases, and whose value the government props up with socialist policies. [1]

Is there any data exploring the relationship between real estate and median family net worth? I would be curious to see a model correlating property values to median household wealth - because I'd imagine there's a strong correlation.

[1] note: socialism strictly means "centralized planning", which these government programs are. So, I use the term in an academic sense, not a derogatory one.

No data to back it up at the moment but I am pretty sure that home ownership has historically been a big wealth builder for the middle class. It historically has allowed people to use leverage on a fairly stable asset, while doubling as a hedge against rent. Now this is of course excluding 2008 and whatever has happened in the last 3 years(more institutional investment in residential real estate).

Yeah but what’s the standard deviation.

Yaaay! After the celebrations, maybe we start the vote on whose face goes on a 1k, 10k, and 100k bill???

That's why the median --- which is mentioned at 193k in the article --- is a much more useful metric for household income/net worth. It's just like saying whenever Bill Gates walks into a room, the average person in that room instantly becomes a billionaire.

Really tragic that you still fed the misleading nature of the title by repeating the median point. It was a really good article I thought and took the time to explain the numbers and related conclusions.

Please elaborate.

Sure. I agree that the title is incredibly clickbaity and misleading, but I really appreciated that the author took the time to explain the nuance of how misleading "average" can be when looked at in isolation and how the typical American actually looks like financially. With that, I was a bit disappointed to come to the comments and see that people still wanted to do the typical internet "well actually" and make the same exact point that was made in the article.

The "average person" doesn't become a billionaire, but the average wealth becomes > $1 billion.

Both mean and median are useful (as well as many other statistics), depending on what your goals are. Median can be very misleading in some contexts.

It would be more useful if they counted expected lifetime income. Most assets are valued at net present value of discounted future cash flows. But they don’t count personal future income for the labor class in their wealth calculation. If you do, even people on welfare are basically millionaires.

Despite to poor wording, this DOES NOT mean the median household is a millionaire

Go to the source and do percentiles of net worth https://www.federalreserve.gov/econres/scf/dataviz/scf/chart...

In the 75-90th percentile of net worth, the median net worth is over a million. So that means that in the 82.5th percentile onwards, it exceeds a million dollars. There are 131 million households in the US. That's 23 million millionaires.

U-S-A U-S-A U-S-A

Of course, this does mean something quite interesting. If each American millionaire gave up $10k, that would be equal cash accumulated to buy out Elon Musk's net assets at current market price. That means, interestingly, that all the things people are upset that a multi-billionaire like him don't do, we could do if we all felt like it.

The truth is we don't feel like it. I certainly don't. I want to keep my $10k :)

Mean millionaire is now poor

With the Gini index, mean household means nothing. What the median US household is worth is what means anything. If only one household had all wealth, its vicissitudes and upswings would change the mean - but not the unknown median.

When everyone is a millionaire, no one is.

That is not what this means at all. There's a big difference between mean (with outliers included) and median.

and there will still only be 21 million bitcoin

For money laundering and drug trades

Calling everyone a millionaire because inflation is rampant seems pretty disingenuous even if technically true. It used to mean that you were wealthy. Now it just means you have a house and a 401k.

Edit: for the naysayers, a new Ford truck costs $100k.

That's what it always meant. Most people that become one reach millionaire status in their older age with a paid off house and a stock portfolio.

It's not at all "calling everyone a millionaire." The "Mean American household" is just the mean, not any real household. Example:

If you have a population of 1000 where one person is a billionaire and everyone else has $0, then the "mean person" is a millionaire when in fact almost everyone has nothing.

The real situation isn't a pure "winner takes all" like that, but it's still quite lopsided.

I think that wording is wrong. "Household" is not an algebraic unit, and thus there is no mean. We're left to interpret what is meant, and responsible statisticians would say "the mean net worth of American families"

"mean person" or "mean household" is not a thing. The wording they actually use is "mean net worth of an American household" which is much more clear.

> Edit: for the naysayers, a new Ford truck costs $100k.

What a childish, disingenuous claim. I'm sure there are Ford trucks going for over $100k -- the market for gigantic luxury "work" vehicles has been around for quite a while now. But they are also making trucks with a US MSRP as low as $23,400.[0]

[0]: https://www.ford.com/trucks/maverick/?gnav=header-trucks-vhp

The vast majority are well over $50k.

What percentage of adults actually have both a house and a 401k?

66% of Americans own their home. I would expect more people have a 401k than that. But it also depends how you count non-working adults, who might own a home but not have a 401k (although then their partner's 401k may be considered theirs in part, perhaps).

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