Have you ever wondered how much money people make? This question often elicits a wide range of responses — from simple numbers to vague comments like “not enough” or “that’s a personal question.”
So where do you fit in the national income bracket? Financial conditions show that many people, especially millennials and Gen Xers, have trouble saving and often have zero net worth. But it’s important to note that income and savings are different concepts. A high salary doesn’t necessarily mean a lot of savings, which is largely due to spending habits. We’ll discuss how to manage spending another day.
Here, we’ll focus on analyzing the average income of Americans using reliable data sources. We’ll also discuss the current economic situation and its impact on wage growth, and provide some practical suggestions for increasing your annual income.
The Social Security Administration (SSA) and the United States Census Bureau (USCB) are two key players in this space. The Social Security Administration collects wage data for individuals who pay Medicare and Social Security, including detailed information such as wage statistics. In contrast, the Census Bureau provides information through surveys, such as the Current Population Survey (CPS) and the Annual Social and Economic Survey Supplement (ASEC).
It is important to understand the mechanics of these systems. The SSA data is a collection of actual wages, while the USCB relies on survey estimates. In addition, the SSA focuses on individual income, while the USCB collects household income data.
Let’s dig into some numbers. According to the U.S. Census Bureau, the median household income in the United States was $63,179 in 2018, up from $61,372 reported in 2017.
The Social Security Administration’s Average Wage Index (AWI) further breaks down income by examining compensation reported on Form W-2 that is subject to federal income tax. This includes wages, commissions, and tips, but excludes investment income such as capital gains and dividends.
A quick note about SSA data: The system provides two average wage numbers. The first is a straight average of actual data. The second uses last year’s average and adjusts for annual wage changes. For example, in 2017, the average wage calculated using the first method was $48,251.57. Using the second method, the number was $50,321.89, indicating a difference of more than $2,000 between the two calculations.
These numbers reflect the income profile of Americans and hint at larger economic trends. Understanding where you stand in these statistics can guide you in making smart financial decisions and potentially increase your income in the years ahead.
The 2018 U.S. Census data provides insight into median household income for different demographics and regions across the country. Unlike the Social Security Administration, the Census Bureau takes a broader approach, assessing income based on household dynamics.
Together, these data sets help approximate the national average income. In 2018, the Census Bureau reported a median household income of $63,179, while the mean household income was $90,021.
Median Household Income by Age Group
Median household income by age group tells a nuanced story:
- Ages 15 – 24: $43,531
- Ages 25 – 34: $65,890
- Ages 35 – 44: $80,743
- Ages 45 – 54: $84,464
- Ages 55 – 64: $68,951
- Under 65: $71,659
- Over 65: $43,696
These figures provide a sobering comparison with national saving averages and net worth data.
The impact of education on average income
A related question is whether higher education is associated with higher incomes. The numbers conclusively show that people with a degree often find themselves among the nation’s highest earners. However, these data do not take into account unemployment rates, student debt burdens, and the lack of job opportunities for educated people.
Here are some numbers from 2014:
- Less than a high school diploma: $488 per week, $25,376 per year.
- High school diploma: $668 per week, $35,776 per year.
- College or associate degree: $761 per week, $39,572 per year.
- Bachelor’s degree or above: $1,193 per week, $62,036 per year.
These data clearly show that having a degree increases a person’s likelihood of economic success. Furthermore, there is a clear income gap between those who complete college and those who do not.
However, it is important to realize that education is not always the ultimate predictor of financial prosperity and high income. Many careers have annual incomes of over $100,000 and do not require a bachelor’s degree.
