Income is a key part of a healthy financial picture. You can use your income to cover expenses, make investments, and build your net worth.
In some cases, your income comes from active sources like a full-time job or a collection of side hustles. In other cases, you’ll have income coming from passive sources such as dividends from your investment portfolio.
But how does your income stack up against your peers? Let’s see how income breaks down across the United States.
What Is the Average Annual Income in America?
As of 2020, the average wage was $55,628.60, according to the Social Security Administration (SSA).
The SSA is one of the best sources for U.S. income information because it uses the average wage index to track raw wages each year.
Raw wages are employment compensation that is subject to federal income taxes, as reported on W-2 forms. The income included on your W-2 would cover regular wages, tips, and more.
Average Household Income in America
The average income index is used by the SSA to make adjustments on an annual basis. But the national average wage index doesn’t measure a household’s entire income throughout the year. Instead, it leaves out any income received through side hustles and investment dividends.
Because many people don’t earn traditional W-2 wages, the median household income tracked by the U.S. Census Bureau is important to consider as well. In 2020, the median household income was $67,521, which was a decrease of 2.9% from the median household income of $69,560 in 2019. This decrease was likely due to the economic impacts of the COVID-19 pandemic.
Meanwhile, the slight increase in wages reported by the SSA reflects a long-term trend of increasing average wages across the country. Although nominal income has increased over time, real wages take inflation into account. And with that, the gains in nominal wages are eaten away by inflation.
Mean vs. Median Wages and Income
When looking at the numbers, it’s important to differentiate between mean and median wage and income figures.
The mean income or wage represents what most people refer to as average income. If you take the income of all earners in the country and divide it by the number of workers, you have the average income.
The median income or wage refers to the place in the distribution where there are an equal number of higher and lower figures on either side. To find the median income or wage, you need to line up the income of all earners from smallest to largest, then pick the value exactly in the middle.
Average Household Income in the U.S. By Demographics
Household income in the U.S. is tracked by the U.S. Census Bureau. As mentioned above, the median household income in 2020 was $67,521.
However, median household income varies dramatically by age, race, education level, gender, and region. To gain a better understanding of the average income in America, we need to break down the data by demographic category.Luckily, the Census Bureau provides a clear breakdown in its 2020 report on Income and Poverty in the U.S.
With age comes experience, but how does that impact your earning potential?
|Age of householder||Median household income|
|15 to 24 years old||$46,886|
|25 to 34 years old||$71,566|
|35 to 44 years old||$85,694|
|45 to 54 years old||$90,359|
|55 to 64 years old||$74,270|
|65 years and older||$46,360|
The median household income of $76,800 for those under age 65 contrasts sharply with a median household income of $46,360 for those older than 65. Income only rises with age until 55, after which it begins to drop quickly.
Education level has a big impact on the median household income. Generally, education is positively correlated with income — the farther you get in school, the higher your earning power.
|Education level||Median household income|
|No high school diploma||$29,547|
|High school diploma, no college||$47,405|
|Bachelor’s degree or higher||$106,936|
However, the type of degree you get does matter. For example, the U.S. Bureau of Labor Statistics (BLS), found that the average wage for a physician or surgeon was $208,000 per year. But those jobs require several more years of school — and more student debt, on average — than most professions.
Income inequality is painfully apparent when you look at the income statistics by race and ethnicity.
|Racial Groups||Median household income|
|Hispanic, any race||$55,321|
It’s easy to see that income earners are impacted by their race or ethnicity. Asian Americans have a dramatically higher family income than the median household income in the U.S., while Black and Hispanic Americans of any race have lower household income than the average.
The gender income gap is also disheartening. According to the U.S. Census Bureau, women are over-represented in lower paying jobs. Additionally, the pay gap grows as they age. In fact, the Quarterly Workforce Indicators put out by the U.S. Census Bureau indicated that women earned 30% less than their male counterparts.
Based on data from the BLS, women earned 82 cents for every dollar earned by a man in 2020. Women who worked full-time in 2020 earned a median income of $50,982, compared to $61,417 for their male counterparts.
|Household status||Median household income|
|Female householder, with no spouse present||$49,214|
|Male householder, with no spouse present||$67,304|
|Female householder, non family||$35,574|
|Male householder, non family||$47,259|
Based on these numbers, it’s painfully obvious that women earn less than men. Although the gender pay gap has regularly shrunk since the passage of the Equal Pay Act of 1963, there’s still a significant difference. One reason for this is that women are over-represented in lower-paying industries.
The area you live in has a big impact on your earning opportunities. Luckily, Census Bureau data offers a closer look at the median household income by U.S. region.
The Northeast covers the Eastern Seaboard states from Maine to Maryland. The South includes everything south of Delaware and west past the Mississippi River into Arkansas, Texas, and Oklahoma. The West includes the Pacific coast states inland to the Rockies. And the Midwest covers everywhere else.
|Region||Median household income|
The South has the lowest household income, just slightly behind the Midwest. With higher costs of living in many parts of the Northeast and West regions, it’s not terribly surprising that the median household income is a bit higher.
Beyond the region you live in, whether or not you live inside of an official Metropolitan Statistical Area (MSA) matters. Typically, rural workers — people living outside MSAs defined by the U.S. Census Bureau — have lower median earnings.
|Metropolitan Statistical Area (MSA) Status||Median household income|
Bigger population centers tend to have more employment and business opportunities. But cost of living tends to be higher in cities and suburbs too.
Putting the Average American Salary in Perspective
The average American salary can be sliced and diced in so many different ways. But two of the most interesting ways to look at these numbers include the distribution of incomes in relation to the poverty line and how these numbers are changing over time.
Income Distribution in the U.S.
The median salary of workers in America is $55,628.60. But by definition, 50% of Americans earn less than the median. Many of them earn less than the federal poverty level.
Whether or not a household is living in poverty is determined by considering the household income and the number of people living in.
For example, a household with one individual over the age of 65 would need to earn at least $12,413 to be considered above the poverty line. But a three-person household would need to earn $20,932 to break the poverty line. According to the U.S. Census Bureau, the poverty rate was 11.4% in 2020. That figure represents 37.2 million people in poverty that year.
In sharp contrast to the poverty line are the top 1% of earners in the country. The 1% threshold varies dramatically based on your state. According to data from the IRS and BLS analyzed by Smart Asset, American families needed to earn at least $597,815 in 2022 to be considered the top 1%.
Average American Salary Over Time
The average American salary has grown over time.
In 1951, the national average wage index was $2,799.16. Since that first year of data collection, the average American salary has grown to $55,628.60.
It’s clear that wages have grown. But what about when inflation is taken into account?
When you look at the national average wage index of 1951 in inflation-adjusted dollars, it would be $27,894.59 in 2020. Since the average household income was $55,528.60 in 2020, real wages have approximately doubled the inflation rate during that time.
Average American Income FAQs
Still have questions about the average income in America? Here are the answers to some of the most common ones.
What Is a Good Income in 2022?
The definition of a good income varies dramatically based on your individual situation. For example, if you live in a higher cost of living area, you’ll need to make more to live comfortably.
In most of the country, a single person earning $67,521 or more per year should be comfortable. After all, that’s the median household income for the U.S. That equates to approximately $1,300 in weekly earnings.
The definition of a good income changes based on your household size. If you have kids, you need to earn more to be financially comfortable.
Additionally, where you live has an impact on your income needs. For those in a high cost of living area, a higher salary is necessary just to make ends meet. All else being equal, you can’t stretch a $67,000 salary as far in New York City or San Francisco as you can in a small rural town.
Of course, more income is always a good thing, regardless of your family size or where you live..
Does the Average U.S. Salary Make You Middle-Class?
According to the Pew Research Center, the middle-class is defined as those making between two-thirds to double the national median income. Since the median household income is $67,521 in 2020. The average household income of $55,628.60 would be considered middle-class.
What Does the Top 1% Make in America?
According to 2022 data from the IRS and BLS analyzed by Smart Asset, American families need to earn at least $597,815 per year to be considered in the top 1%. But the 1% threshold varies dramatically based on your state.
For example, if you live in Mississippi, an annual income of $361,462 puts you in the top 1% of earners in the state. But you’d need to earn at least $810,256 to be in the top 1% of earners in Massachusetts.
Beyond keeping food on the table, higher income can help you tackle your personal finance goals.
Although it’s tempting to compare yourself to the U.S. household income numbers, don’t take these numbers too personally. Instead, pursue an income that will allow you to live a comfortable life. It’s not necessary to be in the 1% to build a solid net worth.
If you want to see how your net worth stacks up against the average, dive into the numbers with us.