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.
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Data now shows the mean net worth of the average American household is $1.06 million.
Andrey_Popov/ShutterstockEven 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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Net worth is determined by more than just what's in your bank account.
Montri Thipsorn/ShutterstockEven 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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Here's how the data breaks down by age groups in the U.S.
Ground Picture / ShutterstockSo, 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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A boom in the housing market is fueling much of the progress—but there are still fewer millionaires overall.
Rawpixel.com/ShutterstockWhile 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.
