Median versus Average

Or, what's the difference?

No one likes to be a statistic, but at some point we have to acknowledge that certain aspects of our lives have numerical significance and constrain us in one way or another.

If the average social security payout in the USA is $1,543 per month, you can place yourself above or below that number, statistically above or below average.

Since there's an upper limit to social security payments, using averages is fine.

With a median number we have to think a bit differently.

If you go to a bar and there's a billionaire having beers next to you, the next person entering the bar will have a very high average annual income on average, since the income of the total number of customers will be added together and then divided.

If there's 25 people in the bar and 24 of them make $100,000 a year, while the billionaire makes $100,000,000, then the average annual income of everyone at the bar is $6,400,000 per year. I'll bet you wish you were at that bar lol.

The median income is the middle number. So you line up each number from lowest to largest and pick the middle one, which is $100,000. The number is accurate for 24 out of 25 people at the bar and really wrong for the billionaire.

But the average number is wrong for everyone and tells us almost nothing. It tells us there's some rich people at the bar, since on average everyone is a millionaire. But $6.4m is a pretty meaningless number.

Now take a look at this list below. The average net worth takes into account all of the billionaires and skews the number in a direction that only makes sense for maybe 1% of Americans.

See more here.

The median net worth plots all Americans, with poverty-stricken folks at one end and gazillionaires at the other and uses the middle number, which is a better representation of the populace.

If we assume that the size of each American household is 2.53 people, and we remove the .53 (since they're the younger ones and can still earn money), then each household member in the retiring age bracket of 65 - 74 year olds has $133,200 plus a social security payment of $1,543 (see above).

If you earn 4% on the $133,200 you'd receive approximately $444 a month. Adding $1,543 + $444 = $1,987 or let's say $2,000 bucks.

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If you are sharing your life with an American senior citizen then as a couple you've got 4 grand a month.

Where can you live comfortably on $4,000 a month?

Here's a list of countries that make up International Livings' Annual Global Retirement Index:

Bali is #16. I don't agree, but that's ok.

These dogs have voted. Bali is #1!

Decide for yourself.

Later,

Neill