Despite the recent economic rally, some things still concern me about the state of America’s financial affairs. When it comes to how much we each make, owe, and save, before we can improve on these elements, we need to examine the numbers. The ten financial statistics below provide a glimpse into the average American’s financial life and provide context for positive changes you can make to your money.
1. Average monthly Social Security benefits – Numbers from January 2017 peg the average retired worker as receiving $1,363 per month from their Social Security retirement benefit. This figure translates into $16,356 per year. Studies have shown that about 21% of married couples and 43% of single retirees rely on Social Security for 90% or more of their total retirement income. But Social Security is designed to supplement an average of 40% of the worker’s pre-retirement income. The fix? Start saving for retirement now, so that you have a little (or preferably big) nest egg for your retirement. Which brings me to my next point…
2. Savings averages for retirement – A 2015 study by the National Institute on Retirement Security found that 62% of working households age 55-64 had retirement savings worth less than their annual income, and reported median retirement account balances for households nearing retirement was $14,500. But while it’s important to start saving early for retirement, it’s also never too late to turn things around. You can create a comfortable retirement even if you get a late start to saving. The JP Morgan’s Retirement Savings Checkpoint chart below is a great way to start mapping your retirement savings journey.
3. Average personal savings rates – Today this figure comes in at 5.5%, a marked improvement from 2005’s low of 1.9%. This number, however, includes retirement savings and emergency savings, so it’s not likely to provide an adequate financial cushion for the average person. Experts agree that saving 10% to 15% of your income is a safer start (excluding retirement contributions from your employer).
4. America’s average 401(k) balance – Speaking of employer retirement contributions, statistics show the average person has $96,288 in their 401(k) plan. But this is a ballpark number that doesn’t account for things like different age groups. And averages tell only part of the story. Medians are much more telling, as they provide the value separating the higher half of a population from the lower half. By age group, here are the median 401(k) balances, according to Vanguard’s 2016 How America Saves report:
5. Gross household income average – Based on data from the IRS, the average American household income is $71,258. An important note is that this figure is from 2015. Since the U.S. median wage growth in 2016 was about 4%, it’s a fair assessment that the current figure is closer to $74,000.
6. Americans’ average household debt – For those of us who have debt, the average total amount we owe is $132,529. This dollar amount includes all types of debt, like mortgages, credit cards, car loans, and student loans. A breakout of the numbers shows average mortgage debt at $172,806, credit card balance averages at $16,061, and car loans averaging $28,535.
7. Federal income tax rates – Average Americans pay an effective federal income tax rate of 13.5%. In 2015, this rate translated into an average federal income tax bill of $9,655. Averaging all taxes – 9.9% in state and local income taxes, 3.3% in Social Security taxes, and 1.45% to Medicare – the overall income-based effective tax rate is just over 28%.
8. Tax refunds in 2016 – Now we get to the juicy part of taxes – what we get back. For last year’s filings, the average refund was $2,860. All total, over 70% of Americans got tax refunds. The numbers totaled more than $317 billion. This year, because there’ve been few changes in the tax regulations, the figures are expected to be similar. If you’ve got a nice big refund on the way, consider wrapping it up with some savings and setting aside $10,000 to invest.
9. Americans are charitable – Preliminary data from the IRS for the 2015-tax year shows the average taxpayer claimed a charitable contribution deduction of nearly $5,500. Here, it’s important to break out this number. The figure only includes the 30% of people who itemized their deductions. And charitable contributions tend to vary widely with income.
10. Average FICO credit scores – According to the newest FICO Score High Achievers Study, credit scores are up by five points since 2015, averaging 700. Average consumers have six open revolving credit accounts and carry non-mortgage balances of $8,611. This correlates to 15% of total available credit lines. For folks with a FICO score over 800, they have a revolving account balance of $1,446, representing just 4% of their available credit.