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Average American Saves Very Little For Retirement

Updated on April 28, 2010

Middle class americans

Average American household
Average American household

Do You Consider Yourself Middle-class Americans? Really?

There Are Only: Poor, Very Poor, Rich, and Very Rich Americans in USA

Contrasting Middle-Class Americans in 1960 and 2010

Despite the recent recovery in the U.S economy, many American families continue to struggle, with income and other living standards slipping below thresholds that traditionally represent middle-class quality of life.

The following metrics and data represent the middle-class Americans based U.S government data and non-profit studies. It is true that statistics can be misleading but there are clear insights to be found from the following data.


  • Health care costs have risen far more than any other aspect of the family budget since 1990, with no end in sight.
  • Housing costs have risen more than twice as fast as income since 1990.
  • The housing bubble was one factor that inflated housing costs and prices, but the typical family also now lives in a much bigger home.


Median Household Income: $81,000

In 50% of the families in the middle of the scale the household income ranges from $51,000 to $123,000 for a typical family of four (two-parent and two-child family).

In the single-parent category, median income for a single-parent, two-child family is about $25,000.


Median home price: $231,000
Annual mortgage payments : $17,600

Median size of new single family home in 1979: 1600 square feet.

Median size of new single family home in 2010: 2300 square feet


Median spending on health care in 2009: $5100

This figure includes health insurance premiums, and other out-of-pocket expenses for health-related purposes.


Median spending for cars in 2009: $12,400 per year
Average family has: 2 cars
For new purchases of cars, total dollar values spent for purchasing cars (average of two cars): $45,000


Typical family saves about: $4100 per year for future college expenses of their kids.

Median-income family saves $2600 per year for retirement.
(3.2 % of their annual income)

Median-income family saves: 3.2 % of their income for retirement.

Of course this is the median figure; many American families don't hit even that modest goal due to stock-market losses over the last several years and lost wages from unemployment.


Median family spends $14,200 for food, clothes, utilities, entertainment, and other living expenses.


In 76% of two-parent families, both husband and wife work.

The higher the household income, the more likely that both parents are contributing.


Typical American household head (normally husbands or fathers) has a high-school diploma and two years of college education.

That’s a good thing; education is a key factor in lifetime earnings, and high school dropouts face a dimmer future by nearly every measure.


What's your top priority?

In 2008 poll by the Pew Research Center, 68% of respondents say that “free time” is top priority, not healthy kids, strong marriage, or great career.

And only 12% said that being wealthy was the top priority.


The median net worth of household in America is: $84,000, according to data from Federal Reserve. This is down 30% since 2007, due to losses in stock portfolios and declining home values.


18% of disposable income spent on mortgage payments, car payments, credit cards, and other types of debts.


Based on data from Tax Foundation, the total federal, state, and local tax burden on a median-income single-earner family in 1955 was 17.3%.

In 2008 it was 37.6% (40.9% for a two-income family with the same total income).

It's gone down a little since then, but not much. That’s 30-plus percent of your salary gone.


Average US annual wage: $36,760 ( US Census data)
Expected monthly take-home after taxes, social security, health care: $24500

Monthly take-home pay: $2041

Median US home selling price 2006: $230,000 ( note that this is lower than average)
Monthly mortgage: $1342 (30 year loan, low 5.75% APR)

Average Electricity/heating: $124/month ( Again, from the US census data )
Car payment on a modest $13,000 car: $250/month (60 month loan)
Car and home insurance of $75/month
Food: $438/month ( USDA "thrifty" food buying plan for a family of two adults, two kids)
Trash pickup/water service: $30/month

Net income left: -$218.00 (negative )

Math: $2041 - $1342 - $124 - $250 - $75 - $438 - $30 = -$218

Yes, that's negative $218 left over - net operating loss.

It is important to note that *no* entertainment, leisure, or travel items are factored in here, nor are computers, broadband internet, iPhone (who does not have cellular phones these days?), Netflix fee, car maintenance expenses; nor is credit card debt, nor are such basic necessary purchases such as home and car maintenance expenses, appliance purchases, clothes or gasoline costs for driving to work.

This is for a single, modest car – in contrast to the fact the median number of cars owned in American household is two cars. This also assumes that the employed member of the household has decent health insurance coverage from their job. In short, the numbers just don't add up and many families are having difficulties making ends meet. I know this is estimation on the low-end; of course, there are regional variations, but cheaper housing typically is found in areas with lower salaries.

It's difficult to find information on the cost of purchasing many necessities in the 60's, but it looks like in 1965, the average annual salary was $5400, and the median new home sale price was $18,000. What’s important to note is that new home prices have increased by 1270 %, while salaries have only increased by increased by 680 %.
Now for the double-whammy, the tax burden, over the same time, has doubled (as above).

That should tell you a huge part of the answer of current recession and housing bubble.
This analysis isn't about iPhones, iPods, cable TVs, or other average American consumption. A high-school teenager working a summer job can afford an iPod and basic cable. It's not about credit card debt, except for the fact that it's easy to go into debt when housing is so expensive.


The conclusion here is that: the average American adult working all year simply can't afford an average house, a modest car, and the bare necessities for their family. And I hope it's clear from these numbers why it's hard to make ends meet, not just for single-income families, but even for those with two working parents.

I admit that my analysis does not allow for geographical variations in living expenses. In New York City, earning $100,000 still makes you feel poor, but in West Virginia you are a king. National averages are worthless as a measurement of social strata, but many of the figures above represent median income so the data can used accurately for accounting income and cost of living for general Americans.


Based on common definition of middle-class and drawing empirical conclusion based on the data, there are no true middle class families left; only the poor and very poor and the rich and very rich. It is quite disconcerting to think that many Americans still believe they are middle-class families and have large amount of financial debts.


Tell us what you think in the comments below. If you have something meaningful to add to the discussion, please add it below for the benefits of other readers.

The question is:
Are you middle-class Americans?

Or simply Poor, Very-poor, Rich, or Very-rich American


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