I like looking at ERN’s articles from time to time because they cover so much that I’m all but guaranteed to learn something.
This article is about how, despite the wealth inequality figures, the US is still doing okay when it comes to wealth accumulation. Here are some of my personal highlights from the article:
If I want to put a positive spin on the unpleasant wealth inequality stats in the U.S., I would again point to the net worth chart by age group: Some of our inequality is due to the natural wealth accumulation lifecycle. For example, within my age group (45-49), the wealth Gini coefficient is lower: 0.769. Americans are very good at building assets, thanks to their entrepreneurial spirit and generous tax incentives, like tax-advantaged retirement plans and capital gains deferral.
And later:
It’s also worth pointing out that the Gini coefficient decreased in 2022 and now stands at the lowest level since 2007, though still far above the Gini in the 1990s.
And this is an interesting alternative to some of the rhetoric I’m seeing about the eroding middle class:
If we compare the wealth distribution in 1989 with 2022, most percentiles gained ground. True, the 1%, 5%, and 10% lowest percentile had negative to zero net worth figures. The 1% poorest got deeper into debt. But the middle class is getting richer, albeit modestly slower.
There’s a lot here, and my takeaway is that FIRE should continue to be a possibility to the middle class and above. It’s not a weird phenomenon that only a lucky few were positioned correctly to achieve, but conditions remain good if you want to put in the work to love below your means and invest consistently.
Anyway, I like looking at graphs and deep analysis like this. Please share your thoughts.
Quick reminder that the mean net worth (sum divided by housholds) is often misleading. If you have one billionaire and hundreds of people starving, you still get a nice mean (–> the average person is a millionaire).
Looking at the median net worth however (the value half of households lie above and half lie below) usually gives a better understanding about the situation of the “average Joe” (or “median Joe”?) That only lies at 192.700$ in the US.
So no, the majority in the US is far from being millionaires.
And the line “despite the wealth inequality (…) the US is still doing well when it comes to wealth accumulation” should be read "if it weren’t for wealth inequality, the US would be doing pretty well when it comes to wealth accumulation.