As 2024 hits its stride, many find themselves reevaluating their professional paths. Whether sparked by recent life experiences or a desire for fresh challenges, a new job can be invigorating. For those nearing retirement, it’s crucial to approach a potential job change strategically. Of course, the salary is important, but conducting a deeper analysis is essential to ensure a smooth transition.
Decoding the offer letter
While salary is a significant component of any job offer, carefully reviewing the offer letter can reveal many important details. Scrutinize the information concerning signing bonuses, performance incentives, and the full range of benefits offered.
The employer’s 401(k) matching program and vesting schedule are particularly important for those nearing retirement. While your own contributions always belong to you, your employer’s contributions may be subject to a vesting schedule and must be earned over time. If you are counting on your employer’s contributions as a source of wealth, be sure you have enough runway left to satisfy the vesting schedule. Take the time to consider the expected work hours, vacation policy, and reporting structure.
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Managing existing 401(k) or pension
Transitioning to a new position often raises questions about what to do with your existing retirement savings. Fortunately, there are several options, which include taking no action and leaving your old retirement accounts in your former employer’s plan, moving your retirement plan balances into your new employer’s plan (provided this is allowed), and rolling your existing balances into a new or existing Traditional IRA or Roth IRA that is held in your name.
When enrolling in your new employer’s 401(k), contribute enough to maximize the company match. Consider contributing more if the investment options are attractive and your cash flow can accommodate this. Carefully review the plan’s investment options and select mutual funds that align with your risk tolerance and time horizon to retirement. Consider working with a financial adviser to develop an investment strategy tailored to your specific needs.
Optimizing benefits
A robust benefits package can significantly enhance your overall compensation. Familiarize yourself with the health insurance options offered by your new employer, including supplemental life insurance, disability insurance, mental health support, and wellness programs. When selecting a health plan, consider factors such as network coverage, deductibles, and out-of-pocket expenses.
Additionally, explore supplemental insurance options like disability insurance and mental health support programs. You may want to consider a health savings account (HSA), which is a tax-advantaged account for those with high-deductible health plans. Contributions are pre-tax, which can reduce your tax burden and funds grow tax-free and can be withdrawn tax-free for qualified medical expenses like prescriptions and dental care.
Tax withholding
When starting a new job, your employer will determine how much of your salary to withhold for federal and, potentially, state and local taxes. Be sure to complete the W-4 form accurately to avoid overpaying or underpaying taxes throughout the year. If you plan to become self-employed, remember to factor in estimated tax payments to avoid a significant tax burden come filing season. Significant life changes, such as marriage or the birth of a child, may also necessitate adjustments to your W-4 withholdings.
Fringe benefits
Many employers offer fringe benefits beyond base salary and traditional benefits. These perks can take various forms, including free meals, stock options, educational assistance programs, commuter benefits, and even employee discounts. Remember that most fringe benefits are taxable and will be reflected on your W-2 form.
A strategic approach
A career change can be an enriching experience, offering opportunities for professional growth and potentially improved financial security. For those nearing retirement, it’s especially important to be strategic in your approach. Look beyond the headline salary and carefully consider the entire compensation package, including benefits, retirement plan options, and tax implications.
A client or prospective financial advisery client leaving an employer typically has four options regarding an existing retirement plan (and may engage in a combination of these options): (i) leave the money in the former employer’s plan, if permitted, (ii) roll over the assets to the new employer’s plan, if one is available and rollovers are permitted, (iii) roll over to an Individual Retirement Account (“IRA”), or (iv) cash out the account value (which could, depending upon the client’s age, result in adverse tax consequences). If the financial adviser recommends that a client roll over their retirement plan assets into an account to be managed by the adviser, such a recommendation creates a conflict of interest if the adviser will earn new (or increase its current) compensation as a result of the rollover. When acting in such capacity, a registered investment adviser serves as a fiduciary under the Employee Retirement Income Security Act (“ERISA”), or the Internal Revenue Code, or both. No client is under any obligation to roll over retirement plan assets to an account managed by a financial adviser.
Millions of over 50s risk having an “insufficient income” in retirement, pension experts are warning.The International Longevity Centre (ILC) is highlighting figures from the Financial Conduct Authority (FCA) which shine light on pension savings in the UK.
US median income by age
US median income by age
In 2023, the median income for all full-time wage and salary workers in the United States was $58,019, but this number varied significantly based on age. Median income more accurately measures the typical income level for an area than average income. Examining median income is a better way to discern the economic realities of earning, saving, investing and retirement for different age groups in the U.S.
To shed light on these differences, MoneyGeek analyzed data from the Census Bureau’s One-Year American Community Survey and Labor Force Statistics from the U.S. Bureau of Labor Statistics, providing a detailed median income breakdown by age, state and gender.
Key Findings: Median Income By Age
The median annual income in the U.S. for full-time wage and salary workers was $58,019 in 2023.
- Median earnings generally increase with age — starting from $31,928 with the 16 to 19 age group, peaking at $65,247 for the 45 to 54 age group — before declining to $56,238 for those 65 and older.
- Median income grew by approximately 26% between 2018 and 2023. The 16 to 19 age group saw the most significant increase at 37%.
- Alaska, Hawaii, Washington and Utah had the highest median salaries for those under 25. In the Northeast, Massachusetts, New Jersey and New Hampshire had the highest median salaries for those aged 25 to 64.
- The wage gap between men and women is widest for the 55 to 64 age group at $16,276 and is narrowest at $3,068 for the 20 to 24 age group.
Annual Median Income by Age
A closer look at median salary data reveals a general increase in earnings as individuals age, with the highest median salary of $65,247 observed in the 45 to 54 age group. The most substantial median salary growth takes place between the 20 to 24 ($38,194) and 25 to 34 ($54,340) age brackets. Earnings peak in the 55 to 64 age group ($63,310) and then decline for those aged 65 years and older ($56,238).
Five-Year Income Growth Trends
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Incomes have risen for all age groups from 2018 to 2023, but the most substantial increase has been for those aged 16 to 19, with a 37% boost in annual earnings. The growth rates for ages 20 to 44 are within the same range, ranging from 27% to 30% over the same period. The growth rate begins to decline for older age groups, with a 25% increase for ages 45 to 54, 22% for ages 55 to 64, and the lowest at 16% for those aged 65 and over.
Gender Wage Gap by Age Group
![Gender Wage Gap by Age Group](https://bloximages.chicago2.vip.townnews.com/pantagraph.com/content/tncms/assets/v3/editorial/6/02/602b0701-e43e-5559-8851-c9ba827e3437/665a201e4baea.image.png?resize=150%2C80 150w, https://bloximages.chicago2.vip.townnews.com/pantagraph.com/content/tncms/assets/v3/editorial/6/02/602b0701-e43e-5559-8851-c9ba827e3437/665a201e4baea.image.png?resize=200%2C106 200w, https://bloximages.chicago2.vip.townnews.com/pantagraph.com/content/tncms/assets/v3/editorial/6/02/602b0701-e43e-5559-8851-c9ba827e3437/665a201e4baea.image.png?resize=225%2C119 225w, https://bloximages.chicago2.vip.townnews.com/pantagraph.com/content/tncms/assets/v3/editorial/6/02/602b0701-e43e-5559-8851-c9ba827e3437/665a201e4baea.image.png?resize=300%2C159 300w, https://bloximages.chicago2.vip.townnews.com/pantagraph.com/content/tncms/assets/v3/editorial/6/02/602b0701-e43e-5559-8851-c9ba827e3437/665a201e4baea.image.png?resize=400%2C212 400w, https://bloximages.chicago2.vip.townnews.com/pantagraph.com/content/tncms/assets/v3/editorial/6/02/602b0701-e43e-5559-8851-c9ba827e3437/665a201e4baea.image.png?resize=540%2C287 540w, https://bloximages.chicago2.vip.townnews.com/pantagraph.com/content/tncms/assets/v3/editorial/6/02/602b0701-e43e-5559-8851-c9ba827e3437/665a201e4baea.image.png?resize=640%2C340 640w, https://bloximages.chicago2.vip.townnews.com/pantagraph.com/content/tncms/assets/v3/editorial/6/02/602b0701-e43e-5559-8851-c9ba827e3437/665a201e4baea.image.png?resize=750%2C398 750w, https://bloximages.chicago2.vip.townnews.com/pantagraph.com/content/tncms/assets/v3/editorial/6/02/602b0701-e43e-5559-8851-c9ba827e3437/665a201e4baea.image.png?resize=990%2C525 990w, https://bloximages.chicago2.vip.townnews.com/pantagraph.com/content/tncms/assets/v3/editorial/6/02/602b0701-e43e-5559-8851-c9ba827e3437/665a201e4baea.image.png?resize=1035%2C549 1035w, https://bloximages.chicago2.vip.townnews.com/pantagraph.com/content/tncms/assets/v3/editorial/6/02/602b0701-e43e-5559-8851-c9ba827e3437/665a201e4baea.image.png?resize=1057%2C561 1200w)
The median income wage gap between men and women varies across age groups, with 16- to 19-year-old men earning $3,302 more per year than women in the same age group. This gap narrows slightly for the 20 to 24 age group, with a difference of $3,068, but then dramatically increases to $6,422 for those aged 25 to 34. The wage gap is greatest at $16,276 for the 55 to 64 age group. The gap begins to decrease as individuals approach retirement, with a difference of $10,712 for those aged 65 and over.
Median Household Income by Age and State
![Median Household Income by Age and State](https://bloximages.chicago2.vip.townnews.com/pantagraph.com/content/tncms/assets/v3/editorial/0/14/014cd364-4461-59c5-8a8d-20a72825af44/665a201e97565.image.png?resize=150%2C82 150w, https://bloximages.chicago2.vip.townnews.com/pantagraph.com/content/tncms/assets/v3/editorial/0/14/014cd364-4461-59c5-8a8d-20a72825af44/665a201e97565.image.png?resize=200%2C109 200w, https://bloximages.chicago2.vip.townnews.com/pantagraph.com/content/tncms/assets/v3/editorial/0/14/014cd364-4461-59c5-8a8d-20a72825af44/665a201e97565.image.png?resize=225%2C122 225w, https://bloximages.chicago2.vip.townnews.com/pantagraph.com/content/tncms/assets/v3/editorial/0/14/014cd364-4461-59c5-8a8d-20a72825af44/665a201e97565.image.png?resize=300%2C163 300w, https://bloximages.chicago2.vip.townnews.com/pantagraph.com/content/tncms/assets/v3/editorial/0/14/014cd364-4461-59c5-8a8d-20a72825af44/665a201e97565.image.png?resize=400%2C218 400w, https://bloximages.chicago2.vip.townnews.com/pantagraph.com/content/tncms/assets/v3/editorial/0/14/014cd364-4461-59c5-8a8d-20a72825af44/665a201e97565.image.png?resize=540%2C294 540w, https://bloximages.chicago2.vip.townnews.com/pantagraph.com/content/tncms/assets/v3/editorial/0/14/014cd364-4461-59c5-8a8d-20a72825af44/665a201e97565.image.png?resize=640%2C348 640w, https://bloximages.chicago2.vip.townnews.com/pantagraph.com/content/tncms/assets/v3/editorial/0/14/014cd364-4461-59c5-8a8d-20a72825af44/665a201e97565.image.png?resize=750%2C408 750w, https://bloximages.chicago2.vip.townnews.com/pantagraph.com/content/tncms/assets/v3/editorial/0/14/014cd364-4461-59c5-8a8d-20a72825af44/665a201e97565.image.png?resize=990%2C538 990w, https://bloximages.chicago2.vip.townnews.com/pantagraph.com/content/tncms/assets/v3/editorial/0/14/014cd364-4461-59c5-8a8d-20a72825af44/665a201e97565.image.png?resize=1035%2C563 1035w, https://bloximages.chicago2.vip.townnews.com/pantagraph.com/content/tncms/assets/v3/editorial/0/14/014cd364-4461-59c5-8a8d-20a72825af44/665a201e97565.image.png?resize=1050%2C571 1200w)
The Western region of the U.S. has the highest median annual salaries for those under 25, with Alaska leading at $60,279, followed by Hawaii at $55,320, Washington at $54,660 and Utah at $54,506. In the Northeast, Massachusetts, New Jersey and New Hampshire stand out for their high median salaries among those aged 25 to 64. Each of these Northeastern states has an annual median income of over $101,000 for those aged 25 to 44, while the 45 to 64 age group sees median incomes exceeding $114,000. Hawaii, Maryland and Alaska are the best states for earners 65 and over, with annual median incomes above $66,000.
FAQ About Median Income by Age
MoneyGeek addresses the most frequently asked questions about median income by age in the U.S., shedding light on income differences among age groups.
What are the median earnings in the U.S. by age group?
Median annual earnings for individuals in the U.S. are $31,928 for 16- to 19-year-olds; $38,194 for 20- to 24-year-olds; $54,340 for 25- to 34-year-olds; $65,234 for 35- to 44-year-olds; $65,247 for 45- to 54-year-olds; $63,310 for 55- to 64-year-olds; and $56,238 for those 65 and older.
How much does the average 16- to 24-year-old make in the U.S.?
According to median income statistics, the average 16- to 19-year-old in the U.S. makes $614 weekly or $31,928 annually.
Which age group has the highest income?
The age group with the highest median income is 45 to 54. Their median weekly earnings are $1,255, and their annual earnings are $65,247.
Related Content
The resources listed below offer valuable information on income by state and region, along with tools for saving and preparing for retirement.
- Median Income by State: Discover how median income varies by state and age. This resource offers a comprehensive analysis to help you understand the broader economic landscape.
- Average American Savings Balance: Learn about the average savings balances of Americans. This insight can help you gauge where you stand and how you can plan your savings strategy.
- Average Credit Score by Age: Understanding your credit score helps you evaluate your financial health. Explore how average credit scores change with age and what it means for your financial planning.
- Average Retirement Savings by Age: Get a clear picture of how much people save for retirement at different ages. This can help you assess your own retirement planning and make necessary adjustments.
- Saving for Retirement: Dive into strategies for saving for retirement. This guide provides valuable advice on how to effectively save for your future, regardless of your current age or income.
This story was produced by MoneyGeek and reviewed and distributed by Stacker Media.
US median income by age
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John Ruedi is a regional marketing specialist with Savant Wealth Management in Bloomington.