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Financial Facts and Trends

Below is some information that may be of interest to help you evaluate your personal finances, compare yourself to others, and take future action:

• The median (exact halfway point) household income in the United States was $42,151 in 2000. Ten percent of that is $4,215. If that amount were deposited each year in an investment yielding an average of 6 percent, in ten years, an investor would have $55,557.
• If inflation averages 3 percent, prices will double in 24 years. Today's $25,000 car will cost about $50,000 in 24 years, about $37,500 in 12 years, or about $31,250 in 6 years.
• Only about a third of workers with a lump sum distribution from a pension plan roll the money over into another tax-deferred account. The other two-thirds, particularly those with small lump sums, spend their retirement savings, even though they pay a penalty and income taxes to do so.
• Traditional individual retirement account (IRA) contributions may be deductible for taxpayers who are not participants in an employer retirement plan or plan participants with income below certain levels ($44,000 for singles and $64,000 for married couples filing jointly in 2002). Roth IRA contributions are non-deductible, but withdrawals of earnings are tax-exempt if a taxpayer reaches age 59 ½ and the account is held more than five years. Income limits apply for contributions to Roth IRAs: $110,000 for single filers and $160,000 for joint filers.
• The earlier one starts to save for retirement, the longer they can benefit from compound interest. For example, let's compare two IRA or 401(k) account owners. One saves $2,000 a year for ten years between ages 25 and 34. The other starts to save at age 35 and continues saving $2,000 a year through age 65. Assuming an average annual return of 9 percent, the first saver would have $545,344 and the second would have $352,427, a difference of over $190,000.
• In 2002, housing payments, as a percentage of household income, were at their highest level ever. The average household's credit card debt was $8,367, up significantly from $2,985 in 1990. More than half of U.S. consumers carry credit card balances from one month to the next.
• Itemized deductions were claimed on only about a third of all 1999 tax returns. The other two-thirds of Americans claim the standard deduction, which, in 2002, is $4,700 for single filers, $6,900 for heads of household, and $7,850 for married couples filing jointly.
• In 2002, a record 60 percent of all individual tax returns were signed by paid preparers.
• Mortgage foreclosures due to disability occur 16 times more often than they do for death. The odds of being disabled are about three times higher than those for dying before age 65. A 40-year old, for example, has a 42 percent chance of experiencing a 90-day disability before age 65.
• The maximum income limits in 2002 for tax-free withdrawals of interest on U.S. savings bonds for qualified educational expenses are $72,600 for single taxpayers and $116,400 for joint filers. For full exemption: singles and married couples earning less than $57,600 and $86,400, respectively.
• Contribution limits to tax-deferred 401(k), 403(b), and 457 retirement savings plans are $11,000 in 2002; $12,000 in 2003; $13,000 in 2004; $14,000 in 2005; and $15,000 in 2006. In addition, people age 50 and older can make additional catch-up contributions as follows: $1,000 in 2002; $2,000 in 2003; $3,000 in 2004; $4,000 in 2005; and $5,000 in 2006.
• According to 1998 Social Security Administration figures, Social Security provides an average of 38 percent of retirement income and employer benefits provide 19 percent, for a combined total of only 57 percent. The remaining 43 percent comes from earnings (20%), personal assets (20%), and other sources (3%).