The middle class is a reflection of household economic resources, measured by either income or wealth. Many esteemed sources use income to define the middle class. For example, the Pew Research Center defines middle-class households as those earning between 67% and 200% of the U.S. median household income. That’s between $42,330 and $126,358, using the U.S. Census Bureau’s 2018 median income of $63,179.

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 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 net worth of the American middle class is between $29,760 and $191,900
- Age and educational level 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 their reports, you first need to know averages and quintiles.

### Averages

There are two types of “averages”: the median and the mean.

- The median is the middle point in a range of statistics, sorted high to low. 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 adding up the data and dividing it by the number of statistics in the range. For the same range, the mean is 8+10+13+20+40 = 91 / 5 = 18.2. This is the number we usually think of when we say “average.”

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 the U.S. Census data, the average net worth for U.S. households in 2016 (latest data available) was $299,700. The median* *net worth was $94,670. 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.

The bottom wealth quintile is the impoverished fifth of households. The top wealth quintile is the richest 20% of households.

The bottom quintile is most likely younger households and/or 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 will include 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:

Quintile | Definition | Median Net Worth |
---|---|---|

Bottom 20% | Impoverished | $4,900 |

Next 20% | Lower-Middle Class | $29,760 |

Middle 20% | Middle Class | $86,000 |

Next 20% | Upper-Middle Class | $161,900 |

Top 20% | Wealthy | $479,700 |

If your net worth is between $29,760 and $161,900, you are in the middle class.

## Average Net Worth by Age

Net worth increases by age because households accumulate assets over time. This includes property, cars/other vehicles, and retirement savings. As the table shows below, wealth reaches a peak at retirement age and then declines as retirees spend down their assets.

Here’s a comparison of the median and mean net worth by age group:

Age Bracket | Median Net Worth | Mean Net Worth |
---|---|---|

Younger than 35 | $10,200 | $75,640 |

35-44 | $68,400 | $217,300 |

45-54 | $110,600 | $316,400 |

55-64 | $168,500 | $415,400 |

65-69 | $223,300 | $431,600 |

70-74 | $211,700 | $481,500 |

75+ | $200,700 | $418,500 |

This comparison shows how the mean is much higher, regardless of age. Again, that’s due to the concentration of wealth in the richest households.

## Average Net Worth by Education

Education is highly correlated with net worth, as shown in the table below. Those without a high school diploma only own about $4,900 in median net assets. A high school diploma boosts that to $40,300. A bachelor’s degree quadruples that wealth to $162,100. An advanced degree doubles that to $337,500. The mean is given in the table below only for comparison.

Education | Median Net Worth | Mean Net Worth |
---|---|---|

No High School Diploma | $4,900 | $65,320 |

High School Graduate | $40,300 | $160,900 |

Some College | $45,900 | $175,300 |

Associate’s Degree | $83,550 | $231,200 |

Bachelor’s Degree | $162,100 | $392,800 |

Graduate/Professional Degree | $337,500 | $584,300 |

A 2018 Federal Reserve study found that education creates wealth in three ways:

**The head-start effect:**First, families headed by educated parents earn more than those without college degrees. That gives the children a head start in life. They can attend private schools and receive a better education.**The upward-mobility effect:**This occurs when a child is born into a family without a college degree. Once the child earns a diploma, the entire family becomes wealthier. The study found it boosted family wealth by 20 percentiles.**The downward-mobility effect:**This occurs because when the adult children in a family didn’t earn a college degree, they drag down the family’s wealth. Even if their parents had college degrees, they lowered family wealth by 18 percentiles.

## Racial Disparities and the Wealth Gap

Racial wealth disparities are most pronounced between White households and racial minorities. Whites have more wealth than Black, Latino, and Native-American households. The racial wealth gap is larger than most White people imagine; the facts reveal a significant gap.

The median net worth for White households is $114,700. For Black households, it’s about one-tenth of that, or $12,920. The net worth for Hispanic households is $21,420. For all others, it’s $20,140.

The racial wealth gap exists even among Black people who are highly educated and come from two-parent homes. In a 2013 study by the Economic Policy Institute, the median wealth of Black families with graduate or professional degrees is $200,000 less than similarly-educated White families.

Black or Latino college graduates have disproportionately less wealth than White high school dropouts.

Similarly, two-parent Black households have less wealth than single-parent White households.

A McKinsey study found that the achievement gap has cost the U.S. economy more than all recessions. If there had been no achievement gap in the years between 1998 and 2008, U.S. gross domestic product (GDP) would have been $525 billion higher in 2008. Similarly, if low-income students had the same educational achievement as their wealthier peers over that same period, they would have added $670 billion in GDP.