Here’s how much income you need to be in the top 50% of American households

The Census Bureau’s Current Population Survey (CPS) collects data from about 60,000 U.S. households each month, representing about 110,000 people age 15 and older. Surveys are administered monthly to ensure continuity, but results are published annually.

In 2023, those US households reported a median income of $80,610, up 4 percent from $77,540 in 2022. That means half of households reported less income and half reported more. In other words, any household that earned more than $80,610 is in the top 50 percent nationally.

However, age is an important variable in income, simply because older people have had more time to accumulate assets and advance in their careers. For this reason, anyone interested in assessing their financial situation should use age-based data so that they can compare with their peers.

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Median US household income by age

The Census Bureau defines income as including wages from employment, Social Security benefits, welfare payments, interest on savings or bonds, dividends, unemployment and workers’ compensation, and private and government pensions.

The chart below shows median pretax income by age demographic among respondents to the Current Population Survey.

Data source: US Census Bureau.

As shown, the median income across all households was $80,610 in 2023. Households with people ages 45 to 54 had the highest median income at $110,700, while those aged Those 65 and older had the lowest median income at $54,710.

The 2023 Current Population Survey also provides information on income distribution. The chart below shows household income at selected percentiles.

Data source: US Census Bureau.

The percentile distribution above details what shares of the population had incomes above or below specific thresholds. For example, the income at the 10th percentile was $18,980 in 2023. This means that 10% of American households reported less income last year, and 90% of American households reported more.

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

How middle income earners can build million dollar portfolios

Many financial advisors recommend the 50-30-20 budgeting framework, which divides after-tax income into three spending categories:

• Need: 50% of a household’s after-tax income should be devoted to non-discretionary expenses such as food, rent or mortgage and utilities. Minimum interest payments are also grouped into this category.
• Wants: 30% of after-tax income should be dedicated to discretionary spending such as dining out, hobbies, luxury items and travel.
• Savings: 20% of after-tax income should be dedicated to retirement savings. Interest payments above the minimum level are also grouped into this category.

The 2023 Current Population Survey reported a median after-tax income of $77,790 for households 64 and younger. We selected that age group because many people stop saving for retirement once they turn 65 and instead stretch their retirement account balances.

With this in mind, the 50-30-20 framework states that the average worker under 65 should save about $15,550 per year, which is about $1,295 per month. A smart place to invest that money would be a tracking index fund S&P 500 (^GSPC -0.19%) that Vanguard S&P 500 ETF (NYSEMKT:VOO).

The S&P 500 is considered the best barometer for the US stock market. It has outperformed almost every other asset class over the past two decades and has never produced a negative return in any 20-year period of history. That means investors are essentially guaranteed a return if they put money into an S&P 500 index fund and leave it there for at least two decades.

Moreover, the S&P 500 has typically produced robust returns. The index’s total return level (with dividends reinvested) has been approximately 2,000% over the past 30 years, which equates to 10.6% annually. At this rate of return, if a person were to invest $650 a month in an S&P 500 index fund — about half the amount the average household would need to save each month under the 50-30-20 framework — the portfolio his would be worth $127,900. after one decade, $478,300 after two decades, and $1.4 million after three decades.

In short, the average US household income is more than enough for an investor to build a million dollar portfolio, provided they invest consistently over the long term.