Average Income by Age – Where Do You Rank?

Tracking average income by age is a great way to see how you are doing compared to your age group. According to the Census Bureau’s Current Population Survey in 2016, the average American under 65 is earning $46,409 per year. How does that break down by age?

Average Income by Age is Skewed

Many people default to averages, and this is an important reminder to emphasize how skewed averages are.

To give you an example of this, suppose you live in a city of 100 people with an average income of $50k. That means the total income of the city is $5 million (100 x $50k).

Now imagine that soccer superstar Lionel Messi moves in. Messi made $80 million in 2017. With his $80 million in income, your city’s total income has skyrocketed to $85 million! Therefore, your city’s average income is now $842k!

Obviously the rest of the city’s income has not increased thanks to Lionel Messi, their income is exactly the same as it was. Therefore, we recommend looking at the median income for a more realistic idea. In this example, the median income of the city will still be $50k.

The Census Bureau gets this as well, and included median net worth in their report. Averages are convenient, but median is a more accurate representation.

Median Income & Average Income

With median income and average income in mind, let’s see how each age range stacks up. When you add it all together, the median American income is $48,150 per person.

Most Americans’ income starts to take off once they turn 25, and their peak earnings are from 45 to 49.

Don’t beat yourself up if you’re below the median levels. The sooner you realize this, the sooner you can start job searching and negotiating for a higher salary.

Don’t Lose Sight of the Big Prize

Don’t get too excited if you’re well above the median levels either. If you spend all the money you make instead of saving, your net worth is still at zero. It’s not about how much you make, it’s about how much you save.

Your ultimate scorecard is your net worth by age. There are two ways to increase your net worth: increasing your income, and cutting your expenses. The higher your income, the more you’ll be able to save.

Average Income by Age – The Bottom Line

Tracking average income is a great way to see how you’re doing compared to your age group. With that said, average incomes are highly skewed. Averages are more convenient to talk about, but the median income is more statistically accurate.

If you are below the median, use that knowledge as an opportunity to job search and negotiate a raise. Just remember to not lose sight of the ultimate scorecard. It’s not about how much you make, it’s about how much you save.