Since starting this more than 10 years ago readers have asked, every year, for an update. Unfortunately, this kind of information isn’t like the national debt. We’re never more than a click away from up to the minute data on how much money the world has lent to our debt-ridden government. Data for the Wealth Scoreboard is a little harder to come by.
It is gathered with a survey, the Survey of Consumer Finances, which is done every three years by the Federal Reserve. The first time we get to see any of the survey results is at least a year after the survey is completed. This can be awkward. Few of us felt, in early 2009, that the pre-crash survey from 2007 was very relevant. The world had changed. Home prices had crashed. Stock market prices were way down. Basically, we were more worried about the end-of-life-as-we-know-it than whether we had a posh stateroom on the good ship Lollipop.
But this time is different. Data from 2010 is a pretty good reflection of how things are in 2012. According to another source, the Federal Reserve flow of funds data, the collective net worth of all American households was little changed in early 2012 from 2010. Some individuals may have become vastly wealthier--- think Mark Zuckerberg, however briefly. Others may have become much poorer (think about the thousands who have gone through foreclosure). But in the big, big picture, we’re collectively a tad better off than we were two years ago.
The Wealth Scoreboard is a bit different from other measures of wealth. Rather than just identify the kind of wealth one needs to be in the top 1 percent or some other level, this measure divides us into wealth groups by age. You can thank the research department at the Dallas Federal Reserve bank for doing the heavy lifting.
When it comes to net worth, a little age discrimination is only fair. Young people haven’t had time to accumulate wealth. Older people have had decades. To be in the top 10 percent of your age group in your twenties, for instance, you only need to have a net worth of $83,000. You’ll need more than 20 times as much, a handsome $1,955,000 to be in the top 10 percent if you are in your sixties.
Another thing to notice is that whatever your wealth level, it peaks in the same decade of life--- our sixties. The top 1 percent enjoy a peak wealth of nearly $11.7 million in their sixties while those in the top 1 percent in their eighties have a net worth of about $5.9 million. Ditto, those in the top 25 percent: Their wealth peaks at $712,000 in their sixties and falls to $514,000 in their eighties.
It’s not the same for lesser wealth levels. At the 50th percentile net worth remains pretty much unchanged over the three decades from the sixties through the seventies and eighties. The likely explanation is that the truly wealthy, having achieved financial security, are more inclined to transfer their wealth to children and grandchildren--- or give it to charity--- as they age. Why? Because they aren’t worried about things like long term care expenses. Running out of money isn’t a big pre-occupation.
Another thing to notice: Each step up the net worth ladder requires a lot more wealth. In your forties $70,000 can put you at the 50th percentile for wealth--- that would be some home equity, cars and a few years participation in a well-matched 401(k) program. Get married, stay healthy, keep working at a good job and being in the top half is pretty much a slam-dunk.
But to move into the top 25 percent at the same age you’ll need to have about $260,000, nearly 4 times as much. And it will take almost $500,000 more to advance another 15 percentile to the top 10 percent. Want to move from the top 10 percent to the top 5 percent? You’ll need to double your wealth to $1.4 million.
And how about getting into the much-reviled the top 1 percent? Fuggetaboutit. That will take $5.8 million if you are in your forties, nearly $10 million in your fifties and $11.6 million in your sixties. Those are big numbers. While many people can get into the top 10 percent through high wages as employees, diligent savings, and fortunate real estate choices, the odds are that you will need to be a business owner--- or an employee blessed with good stock options--- to make it into the top 1 percent.
The Distribution of Net Worth by Age Group (dollar figures in thousands)
These figures show the median net worth (assets less debts) of households in each group. Because the figure is the median--- half have more, half have less--- for each group it is not a "threshold" figure; actual net worth can be less to be in each group.
|80 and over
|Sources: 2010 Survey of Consumer Finances, Dallas Federal Reserve Bank Research Department
Next Sunday: Who Really Lost During the “Lost Decade”
Filed Under: Wealth Scoreboard