What is middle class net worth?

If your net worth is between $43,760 and $201,800, you are in the middle class.

thebalancemoney.com - Average American Middle-Class Net Worth - The Balance

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The middle class is a reflection of household economic resources, measured by either income or wealth. Many expert sources use income to define the middle class. For example, the Pew Research Center defines middle-class households as those earning between two-thirds and two times the U.S. median household income. That’s between $45,014 and $134,502, using the U.S. Census Bureau’s 2020 median income of $67,521. Using income to define the middle class has one significant drawback: It doesn’t account for the assets a household has, such as real estate or investments. For example, many retired households have a high net worth but a modest household income. They don’t need a high income, because their homes and cars are often paid off, and they don’t need to save for retirement.

Key Takeaways Net worth equals your owned assets minus your debt.

The average net worth of the American middle class is between $43,760 and $201,800

Age and educational level tend to contribute to wealth

How Is Net Worth Calculated?

Net worth is a measurement of wealth: It is the total of all the assets a household owns minus all the debt it owes.

Typical assets include:

Net home equity, which is your home's resale value minus mortgages and selling costs

Your car or truck’s resale value minus its outstanding loan value

Financial assets, such as retirement account, savings, and cash

The resale value of household items such as consumer electronics, jewelry, or art Household debt includes large amounts like mortgages, auto loans, and student loans. It also includes medical debt and outstanding credit card debt.

How Is the Average Middle-Class Net Worth Calculated?

Several government agencies calculate and report on net worth. To understand these reports, you first need to understand what averages and quintiles mean.

Averages

As a practical matter, there are two types of “averages”: the median and the mean. The median is the middle point in a range of statistics, sorted in order. For example, in the list of numbers 8, 10, 13, 20, 40, the median is the number 13 because it’s exactly in the middle of the five figures. The mean is determined by adding up the data set and dividing it by the number of statistics in it. For the same range, the mean is (8+10+13+20+40) / 5 = 91 / 5 = 18.2. This is the number we usually think of when we say “average.”

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For U.S. wealth, the mean, or average, gives an inflated figure because of the concentration of wealth at the top of the range. As a result, the median provides a better sense of the actual American “average” than the mean does. According to U.S. Census data, the average net worth for U.S. households in 2019 (latest data available) was $445,900. The median net worth was $118,200. That’s a pretty big difference, and it shows how the concentration of wealth among the richest households can skew the mean.

Quintiles

The U.S. Census Bureau uses quintiles to further dive into the nation’s net worth. A quintile is one-fifth of a group, just like a quartile is one-fourth of a group. Dividing Americans into five income groups allows a more detailed look at the middle class. Note The bottom wealth quintile is the division with the lowest net worth. The top wealth quintile is the richest 20% of households. The bottom quintile tends to include younger households and those without much education. Younger groups have not really had a chance to accumulate wealth, and there is a positive correlation between levels of education and levels of wealth. The top quintile typically has a higher percentage of older households and those with the most education. The middle class is often defined as the middle three quintiles. Some further classify this group as lower-middle class, middle class, and upper-middle class. The table below shows the median net worth for these quintiles:

thebalancemoney.com - Average American Middle-Class Net Worth - The Balance

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