The typical American household earns $61,372 a year. But that’s just an average, which means some people make more than that, and some people make less. The median income for Americans is $60,336 per year—meaning half of us earn more than this figure, and half earn less. So, where do you fit in? Which states have the highest incomes, how much does an average American make after taxes, and how do they vary by age group?
How Much is the Average American Income After Taxes?
The average US salary is around $46,000 per year. This figure includes all sources of income: wages, investments and other sources. After taxes, the average American earns $35,000 per year before any deductions have been made to cover things like healthcare or retirement savings. The effective tax rate on this income is 25%, which means that out of every dollar you make after taxes, 75 cents are available for spending or saving purposes.
How Does Income Vary by Age in America?
Income is also likely to vary by age. Americans in the 35-44 age group tend to have the highest income, although it’s not necessarily a direct correlation: Younger people may be earning more because they’re still in school or don’t yet have families to support or both. While this makes sense intuitively, it’s worth noting that the peak earnings period doesn’t correspond with when people typically start families—the average age of first birth is 25, according to data from the Centers for Disease Control and Prevention (CDC).
A similar trend exists among those 65 years old and up: People over 65 have a lower median household income than their younger peers do. This could be partly due to reduced work hours and retirement savings; older Americans who aren’t working yet may be less likely than younger ones who are still employed full-time. As per the experts at LinkedIn, “Income inequality in the U.S. is a huge factor influencing pay discrepancies.”
Which States Have the Highest and Lowest Incomes?
The states with the highest incomes are:
- Connecticut, $2,238
- Maryland, $2,019
- New Jersey, $1,746
- New Hampshire, $1,539
- Virginia and Alaska tie for fifth place with averages of $1,552.
The states with the lowest incomes are * West Virginia ($531), Arkansas ($598), Mississippi ($634), and Alabama ($629).
What Is the Average American Retirement Income?
Retirement income varies widely. In fact, the average retirement income varies by more than $10,000 based on where you live. The average retiree in a state like Mississippi receives $15,026, while those in New Hampshire get around $25,000 per year. This is because some places have higher Social Security benefits than others, and that helps augment retirement savings. The average American retiree gets $1,184 from Social Security each month (as of 2018).
A lot of retirees also get money from other sources like pensions or annuities, which can increase their monthly income, as well as investments and savings that pay cash back into accounts monthly or quarterly (like an IRA).
Now that you know how much the average American makes, it’s time to think about how much you make. Are you ready to calculate your personal income?