Sunday, February 15, 2015

The Peak Of The Mountain

Congrats, older Millennials and young Gen Xers like myself!  Your earnings peak is pretty much at age 40 and after that it's all downhill from there.

By age 40 you're done. That's the conclusion of a report from the New York Fed that looks at lifetime earnings from age 25 through retirement.  
The top chart shows average earnings by age. It's a little hard to immediately see how dramatic the income peak is since the y-axis shows the log of earnings, but if you do the arithmetic it demonstrates that, on average, by age 40 you're within about $1,000 of your peak earnings. You'll get inflation adjustments after that, but for the bulk of us, that's it. Real earnings pretty much plateau after age 40

Here's the charts they are talking about:

The bottom chart illustrates this in a different way. The yellow rectangle shows earnings growth for the bottom 80 percent. The blue line is for ages 25-35, and there's a fair amount of earnings growth except at the very bottom. The red line is for ages 35-45, and it's pretty close to zero. There's virtually no earnings growth for anyone. And the green line is for ages 45-55. It's actually negative. If you put the latter two age groups together, the report concludes that "average earnings growth from ages 35 to 55 is zero." 
Now, outside the yellow box we have the top 20 percent: the well off and the rich. Those folks show a lot of earnings growth when they're young, but they also show fairly healthy growth between ages 35-45. 
And the top 1 percent? That's on the very far right, and as you can see, they show earnings growth at every age level.

So for any early 90's kid like myself, this is about as good as it gets in the paycheck department right about now. You've got 15, maybe 20 years out of college to get to where you're going to be in life, and after that you can expect to make that salary or less from then on out.  If you're a younger Millennial and you're still in retail or food service, well...clock's ticking, guys.

Unless you're a one percenter, that is.  Then the sky's the limit.

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