Do you think you earn enough? Here’s the average income for ages 45 to 54

Household income – and wealth – changes dramatically with age. Data from the Federal Reserve (Fed’s) Consumer Finance Survey It shows that households typically experience a rise in earnings and assets during midlife, peaking at ages 45-54. Understanding how your household compares to others your age can provide perspective on your financial health — and how to improve it.

What is the average income of people aged 45 to 54, and how does this compare to other age groups

Median household income for ages 45 to 54 was $91,880 in 2022, according to the latest Federal Reserve survey. This number represents the highest average income of any age group, representing the peak earning years of most Americans.

By comparison, households ages 35 to 44 reported a median income of $86,470, while those 75 and older earned just $49,070, reflecting sources of retirement income such as Social Security, pensions and withdrawals from savings.

In the Fed’s survey, “household” refers to one person or an economically dominant couple and their dependents, and “income” includes all sources — from wages and business income to investments, retirement withdrawals, and government benefits.

In their mid-40s to mid-50s, many families reach their peak earning years as workers reach higher-paying positions, often after decades of experience and career advancement. (Averages are used rather than medians to reduce the effect of unusually high or low income.)

What Fed data reveals about income gaps in America

Although the Fed survey does not break down income data by education level or homeownership for individual age groups, the results across U.S. households overall reveal clear patterns that likely apply to people ages 45 to 54 as well. Across all households, the median American income was $70,260.

Education creates wide income gaps

The survey particularly highlights the wide income gaps associated with education. All households without a high school diploma had a median income of $32,430, compared to $117,820 for those with a college degree. In the middle are high school graduates who earn an average of $52,960, and those with some college earning an average of $60,530.

While a college degree “helps get your foot in the door and indicates subject knowledge and ability to learn, industry choice and skill sets are becoming increasingly important,” said Tyler Gilley, a wealth advisor at Halbert Hargrove in Long Beach, Calif. He noted that specialized capabilities are often more important than a broad degree in fields reshaped by artificial intelligence (AI), such as data science.

Home ownership makes a huge difference in wealth

The survey also reveals significant divisions regarding housing status. Families of all ages who own their home earn more than twice as much as renters — $94,040 versus $42,160. Whether you rent or own, monthly payments are a given. However, how these payments affect your long-term finances can vary greatly.

“Home ownership — especially with a fixed-rate mortgage — offers predictable payments, which is a big budget advantage,” Gilley said. On the other hand, rent is subject to inflation and can rise unpredictably, which may outpace income growth and put pressure on financial stability.

Paying down your mortgage principal builds equity and serves as a form of long-term savings, but discipline and maintaining liquid assets and an emergency fund are crucial, Gilley said. He also noted that renting may be a better option in some circumstances, with there being no one-size-fits-all solution for everyone.

Why does net worth tell a clearer story than income?

These income gaps only tell part of the story. What really determines financial stability is how much households hold.

Income shows how money flows, but net worth, the value of what a household owns minus what it owes, shows how money stays. According to the Federal Reserve Bank’s survey, the median household net worth for those ages 45 to 54 was $246,700.

The Federal Reserve defines net worth as the total value of financial and nonfinancial assets — homes, real estate, vehicles, businesses, retirement accounts, stocks, bonds and more — minus liabilities such as mortgages, credit card balances and other loans.

“Two families may have similar incomes, but their financial security can differ greatly based on how they manage spending,” Gilley said.

He said that if you liken income to water flowing in a bucket, think of one household that has a constant flow filling the bucket that has holes in it due to uncontrolled spending and spending. Compare that to other beds with a smaller flow but fewer gaps thanks to thoughtful budgeting and spending. The last bucket holds more water, leading to greater financial stability and savings.

“The key is not just how much you earn, but how much you keep,” he said.