The Average American Household Is A Millionaire, Go USA!

Well folks, after writing over 2,300 personal finance articles since 2009, my job here at Financial Samurai is done! According to the 2022 Federal Reserve Consumer Finance Survey, the average American household’s net worth, adjusted for inflation, was $1.06 million. That’s right. The average American household, some of which consists of individuals, is a millionaire!

In comparison, in 2019 the average net worth of an average American household was only $868,000, a 23% increase. Even though a bear market wiped away about 20% of public shareholder wealth in 2022, we clawed a lot of our way back in 2023.

Preserving Our Millionaire Status

Given the average American household is now a millionaire, all that’s left is figuring out how to preserve our millionaire status so that we never have to work in the salt mines again!

Thanks to higher interest rates, one way is to convert the entire $1.06 million into 30-year Treasury bonds yielding 5%. Earning $50,000+ a year risk-free without having to pay any state income taxes is a pretty good deal. We can thank the Federal Reserve for providing the average American such good fortune.

No longer do we have to worry as much about our finances and grind as hard. The anxiety we feel for our children’s futures and for ourselves should decline with such high risk-free rates.

Over the years, I’ve discovered the benefit of having money is not about being able to buy stuff. Having money is more about stress relief, to know that whatever difficulties life throws at you, things will be OK.

Unfortunately, Not Everyone Is An Average American

Do you want to be average? Or do you want to be above average?

I would think that most of you would rather be above average to outperform the masses. Unfortunately, most people are not above average by definition.

Further, the more appropriate metric to measure the typical American’s net worth is using the median.

According to the 2022 Federal Reserve Consumer Finance Survey, the median American household net worth was only $192,900. $192,900 is still a great net worth figure and is 37% higher than it was in 2019. However, it is 80%+ lower than the average American household net worth of $1.06 million.

The reason why the average American household net worth is 467% higher than the median American household net worth is due to the top 10% richest Americans.

The top 10% wealthiest American households have an average net worth of $6.63 million, according to the Fed. Meanwhile, households in the bottom 10% had a mean net worth of $5,300 in 2022. If we remove the top 10% and the bottom 10%, we come up with an average household net worth closer to $500,000.

The average net worth is calculated by adding up the net worths of all American households and then dividing by the number of households. The median net worth is calculated by finding the middle net worth of all net worths in a dataset.

Main Reasons For The Boost In The Average American’s Net Worth

According to the Changes in U.S. Family Finances from 1999 – 2022 report, here are the main reasons why the average American got much richer.

Strong Housing Market

“For families that owned a home, the median net housing value (the value of a home minus homesecured debt) rose from $139,100 in 2019 to $201,000 in 2022. Meanwhile, the homeownership rate increased slightly to 66.1%.”

I continue to believe real estate is the best way for the average American to build wealth. The U.S. government is a strong proponent of homeownership. Meanwhile, real estate tends to ride the almost unstoppable inflation wave long term.

Renting is fine short-term, especially if you don’t know if you want to live in a particular area for longer than five years. But over the long-term, it is unwise to rent because it is unwise to go against inflation and the U.S. government.

The forced savings creates disciplined wealth, especially for those who do not have the discipline to save and invest the difference. Over a 10-year period, the home equity realy starts to build.

As soon as you know where you want to live for five years or longer, I would get neutral real estate by buying your primary residence. As you replenish your funds, I would then buy a rental property to get long real estate.

You can also invest in private real estate funds and deals if you want 100% passive real estate exposure. After I reached my limit of managing four rental properties, I decided to invest in private real estate in the Sunbelt. This way, I could diversify my real estate portfolio and minimize headaches.

Increased Participation In Retirement Plans

“Just over two-thirds of working-age families participated in retirement plans in 2022, up slightly from 2019. While participation remained uneven across the income distribution, all major income groups saw increases in participation between 2019 and 2022. Conditional mean balances in account-type retirement plans rose for families in the upper half of the usual income distribution but fell for those in the bottom half.”

If you don’t have a company pension, then you must contribute as much as possible to your 401(k) and/or IRA, if eligible. Take as much advantage of the tax breaks the government offers. 10 years from now, you will marvel at how large your tax-advantaged retirement funds have grown.

After you get done maxing out your tax-advantaged retirement accounts, work on building your taxable investment portfolio, real estate portfolio, and more.

Your taxable investments are what you need to generate passive income if you want to retire early or take things down. The path to generating a livable passive income stream is long, so start by tethering your passive income to individual expenses. For example, the $300 a month in dividend income will be used to pay for lunch.

Increased Stock Market Participation

“Participation in the stock market increased across the usual income distribution between 2019 and 2022, with families between the 50th and 90th percentiles experiencing a substantial increase. Amid a sizable rise in major stock indexes over this period, all major income groups experienced robust growth in the conditional median and mean values of their holdings.”

Roughly 61% of all Americans own stocks in 2023 according to Gallup. The higher the income and net worth, the greater the percentage of Americans who own stocks. As of 2022, the top 10 percent of Americans owned an average of $969,000 in stocks. The next 40 percent owned $132,000 on average. For the bottom half of families, it was just under $54,000.

The S&P 500 has historically returned about 10% a year, including dividends reinvested, since 1926. Therefore, owning stocks has proven to be a long-term net worth builder. That said, bear markets happen every 5-10 years and can easily wipe out 20% – 50% of gains. As a result, a proper asset allocation based on risk tolerance and financial goals is necessary.

Privately Held Businesses (Private Company Equity)

“In 2022, 20 percent of all families, 14 percent of families in the bottom half of the usual income distribution, and nearly half of families in the top decile of the usual income distribution owned a privately held business. Families that owned businesses had higher income and wealth than those that did not. Further, a family’s income and wealth increased with the number of employees in their business.”

I found the ownership of private company equity to be the most fascinating reason why the average American household is now a millionaire. The net worth composition by wealth shows the wealthiest Americans own the most private company equity.

As a result, to increase your chances of becoming a millionaire, you should either try to start your own business or invest in private growth businesses. Or even better, you could do both!

Net worth composition by levels of wealth

As a business owner, you build wealth by earning income and growing your company’s equity value. Every dollar your private company makes boosts the company’s equity value by a multiple. The reason why is because company’s are acquired based on a multiple of sales, operating profit, or net profit.

If you can’t or don’t want to be a business owner, you can invest in private growth companies through an open-ended fund like the Innovation Fund. It invests in private growth companies in the artificial intelligence, fintech, proptech, modern data infrastructure, and development operations space.

Private businesses are staying private for longer, which means more of the gains are accruing to private equity holders. Recognize the trend and adjust your investments accordingly.

The average american household is a millionaire and many own and invest in private businesses

Shoot To Have A Net Worth Greater Than Average

From a personal finance writer’s perspective looking to help readers build more wealth, it’s great the average American household is now a millionaire. However, from an individual perspective, maybe the average person being a millionaire is not so great.

After all, if the average person is now a millionaire, this means being a millionaire is no longer special. Back in the 1980s, you could live a lavish lifestyle with a mansion and multiple luxury cars as a millionaire. Today, not so much, especially if you live in an expensive coastal city.

Hence, if you want to live an above average lifestyle, it helps to have an above average net worth.

Given the median age in America is about 39 according to the Census Bureau, if you want to be above average, shoot to have a net worth goal greater than $1.06 million by the time you are 39.

Once you reach an above average net worth, life gets a little easier. You can buy a nicer house, drive a nicer car, feel more confident about having children, raise them without stressing as much about money, and so forth.

I’ve also discovered you don’t need to have a top 1% net worth to feel rich. We’re talking a net worth of $5+ million at age 40 and $12+ million at age 60 to be in the top 1%. Once your net worth surpasses the average net worth for your age, you will feel rich enough.

The human condition dictates that you just want to be slightly richer than your neighbor or colleagues to feel really rich. And if you don’t subscribe to this type of financial comparison, I recommend practicing gratitude regularly in order to feel wealthier. The more you are aware about suffering, the less entitled and the more grateful you will be.

Below is the actual median net worth and average net worth by age according to the Federal Reserve Consumer Finance Survey. As you can see from the data, the average net worth really gets a lift from those in the 55 and older age group.

It’s nice to see the 75+ age group have a lower average net worth than the 65-74 age group. This means they are spending down their wealth and not dying with too much.

Age of family head (or reference person) Median net worth Average net worth
Less than 35 $39,000 $183,500
35-44 $135,600 $549,600
45-54 $247,200 $975,800
55-64 $364,500 $1,566,900
65-74 $409,000 $1,794,600
75+ $335,600 $1,624,100

The Number Of Millionaires Is Actually Declining

According to UBS’s annual wealth report, the number of adults in the world with assets of more than $1 million fell from 62.9 million at the end of 2021 to 59.4 million at the end of 2022.

The number of millionaires in the US dropped by 1.8 million to 22.7 million. China had the second highest number of millionaires in the world with 6.2 million.

These statistics are a little concerning. It means the rich are getting richer, but the number of people getting rich is declining. Ideally, society wants more people to get wealthier to reduce crime, increase tax receipts, reduce government welfare expenses, reduce the number of wars, and increase life satisfaction.

The decline in the number of millionaires in America and worldwide is a good reminder to focus on wealth preservation. Once you have a lot of money, you must do what you can to hold onto your wealth. You only need to get rich once. Once you’re rich, you can use your wealth to take care of your children and other people you care about.

Fortunate To Build Your Fortune In America

With 22.7 million millionaires in America, America has by far the greatest number of millionaires in the world. Hence, if you are born in America or work in America, consider yourself lucky! Based on the evidence, you have one of the highest chances of becoming a millionaire compared to any other citizen in the world.

Sure, there are no guarantees you’ll become a millionaire just by living in America. However, at least you have one of the best opportunities to try.

Even if you don’t reach a seven-figure net worth, your quality of life in America is still high. With a stable government, no wars, clean water, public parks, cheap internet, and plenty of space, America will always be one of the best livable countries in the world.

Related post: The First Million Might Be The Easiest

Reader Questions

Are you surprised the average American household is now a millionaire? What are some of the ways you became a millionaire or plan to become a millionaire? What’s stopping folks from investing in stocks, real estate, and other assets that have historically increased in value over time?

Suggestions For Becoming An Average Millionaire

1) Read more. Pick up a copy of Buy This, Not That, my instant Wall Street Journal bestseller. It will help you build wealth in a risk-appropriate manner. Investing in yourself is huge so you have the knowledge to take appropriate action.

2) Invest in real estate. Own your primary residence and start investing in rental properties for rental income and capital appreciation. Dollar-cost average in real estate funds that invest outside your physical holdings for diversification.

3) Start a business or invest in private businesses. The greater the person’s wealth, the greater the percentage of their net worth is in business interests. This includes owning a business and investing in private businesses. You can now easily invest in private growth businesses through the Innovation Fund, which invests in AI, proptech, fintech, and more.

Notice how Business Interests (dark blue) increases the higher the net worth. The richest Americans are entrepreneurs who own and invest in businesses.

Net worth composition by levels of wealth

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