The Census Bureau’s Current Population Survey (CPS) gathers information from around 60,000 U.S. households each month. This represents about 110,000 individuals aged 15 and up. Although the surveys are conducted monthly for consistency, the data are published every year.

In 2023, the reported median income for U.S. households was $80,610, an increase of 4% from the previous year’s $77,540. This indicates that 50% of households earned less than this amount and 50% earned more. Consequently, any household with an income over $80,610 is considered to be in the top half of earners nationally.

It’s also important to consider age when discussing income since older individuals typically have had more time to acquire assets and progress in their careers. Therefore, when evaluating one’s financial position, it’s beneficial to compare oneself against peers of the same age.

The median income across U.S. households by age

The Census Bureau includes in its income definition wages from jobs, Social Security payments, welfare, interest on savings or bonds, dividends, unemployment benefits, workers’ compensation, and both private and government pensions.

The chart below presents median before-tax incomes sorted by age demographics based on the respondents of the Current Population Survey.

The median income reported across all households was $80,610 for 2023. Households headed by individuals aged 45 to 54 featured the highest median income at $110,700, while those aged 65 and over had the lowest median income at $54,710.

The Current Population Survey from 2023 also outlines income distribution, with the chart below showcasing household incomes at various percentiles.

This percentile breakdown illustrates the proportion of the population earning above or below certain benchmarks. For instance, in 2023, the 10th percentile income was $18,980, indicating that 10% of American households earned less than this amount while 90% earned more.

Likewise, the income at the 70th percentile was $127,300 in 2023. This means that 70% of American households earned less, while 30% earned more.

How workers with median incomes can build $1 million portfolios

Many financial experts advocate for the 50-30-20 budgeting rule, which suggests splitting after-tax income into three categories:

• Needs: Allocate 50% of after-tax income to essential expenses such as groceries, rent or mortgage, and utilities. This category includes minimum required interest payments.
• Wants: Set aside 30% of after-tax income for non-essential expenses like dining out, hobbies, luxury purchases, and travel.
• Savings: Dedicate 20% of after-tax income to savings for retirement, including any interest payments that exceed the minimum.

The 2023 Current Population Survey reported a median after-tax income of $77,790 for households with individuals aged 64 and younger. This age group was chosen because many people cease contributing to retirement savings once they turn 65 and start withdrawing from their retirement accounts.

(SNPINDEX: ^GSPC), like the Vanguard S&P 500 ETF (NYSEMKT: VOO).

The S&P 500 is widely seen as a standard measure of the U.S. stock market and has historically outperformed nearly every asset class over the last 20 years. Moreover, it has never recorded a loss over any 20-year timeframe in history, meaning investors are very likely to see profits if they consistently invest in an S&P 500 index fund for at least 20 years.

Additionally, the S&P 500 has consistently generated strong returns. Over the past three decades, its total return (including reinvested dividends) has been around 2,000%, translating to an average of 10.6% annually. At this growth rate, an individual investing $650 per month (approximately half of what a median household should save monthly according to the 50-30-20 rule) would see their portfolio grow to $127,900 in ten years, $478,300 in twenty years, and $1.4 million after thirty years.

In summary, the median U.S. household income is more than adequate for an individual to accumulate a $1 million portfolio, assuming they invest regularly and over a long duration.

Trevor Jennewine has investments in Vanguard S&P 500 ETF. The Motley Fool has investments in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.

The Motley Fool is a partner of YSL News, providing financial news, analysis, and advice to help individuals take charge of their financial futures. Their content is produced independently of YSL News.

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