Let’s say that your neighbor is a surgeon that makes $250,000 a year. Does that mean he or she is rich?
The answer is “no” – and it turns out that the actual statistical relationship between income and wealth is surprisingly low.
Graphing Income and Wealth
The folks at Don’t Quit Your Day Job did an analysis of federal data on income and net worth, and the results can be summarized with this visualization:
The X axis shows annual income, and the Y axis shows net worth. It’s also worth noting that both scales are logarithmic, so they the intervals increase by a factor of 10x.
The above data has some correlation, but it’s not as much as you’d likely think.
The R-squared value, a measure used to express the relationship between two sets of data, is only 33%. In other words, one variable only helps to “explain” the other about a third of the time, which suggests just a partial relationship between income and net worth.
Although this minimal relationship may seem counterintuitive to some people, it all makes more sense when you consider that income is just one factor that could contribute to overall net worth. Income is important, but spending habits, savings, and investments are also important to building wealth over time.
The Age and Experience Factor
Now, here’s the really interesting part: income is a better predictor for the wealth of people in certain age groups, and a worse predictor for others.
Here’s another chart from DQYDJ:
For younger people, there seems to be hardly any relationship between income and wealth. Later on, in the late-30s, the relationship seems to peak. During this age period, income is actually a very good predictor of someone’s net worth.
Finally, from there, the relationship seems to decrease over time. The older you get, the less likely income is a useful predictor of actual wealth.
This makes sense for a variety of reasons, but perhaps one of the more important one is how that money is spent. People that are disciplined savers and smart investors will increase their net worth over time, regardless of their income.
Ranked: The Best Countries to Retire In
Which countries are the best equipped to support their aging population? This graphic show the best countries to retire in around the world.
Ranked: The Best Countries to Retire in Around the World
Our global population is getting older. By 2050, the OECD predicts that 30% of people worldwide will be aged 65 or over.
While some countries are relatively prepared to handle this increase in the elderly demographic, others are already feeling the squeeze and struggling with the challenges that come with a rapidly aging population.
Which countries are the best equipped to support their senior citizens? This graphic uses data from the 2022 Natixis Global Retirement Index to show the best countries to retire in around the world, based on several different factors that we’ll dig into below.
What Makes a Country Retirement-Friendly?
When people consider what makes a place an ideal retirement location, it’s natural to think about white sand beaches, hot climates, and endless sunny days. And, in truth, the right net worth opens up a world of opportunity of where to enjoy one’s golden years.
The Global Retirement Index (GRI) examines retirement from different, more quantitative perspective. The annual report looks at 44 different countries and ranks them based on their retirement security. The index considers 18 factors, which are grouped into four overarching categories:
- Health: Health spend per capita, life expectancy, and non-insured health spend.
- Quality of Life: Happiness levels, water and sanitation, air quality, other environmental factors, and biodiversity/habitat.
- Material Wellbeing: Income per capita, income equality, and employment levels.
- Finances in Retirement: Government debt, old-age dependency, interest rates, inflation, governance, tax pressure, and bank non-performing loans.
Using these 18 metrics, a score from 0.01 to 1 is determined for each country, which is then converted to a percentage. For a more detailed explanation of the report’s methodology, explore Appendix A (page 72) of the report.
The Top 25 Best Countries to Retire in
With an overall score of 81%, Norway comes in at number one as the most retirement-friendly country on the list.
|6||🇳🇿 New Zealand||75%||85%||81%||64%||71%|
|10||🇨🇿 Czech Republic||73%||76%||68%||84%||64%|
|17||🇰🇷 South Korea||70%||80%||59%||68%||73%|
|18||🇺🇸 United States||69%||85%||72%||56%||67%|
|19||🇬🇧 United Kingdom||69%||83%||82%||61%||55%|
Norway is at the top of this year’s ranking for several reasons. For starters, it achieved the highest score in the Health category, largely because of its high average life expectancy, which is 83 years old, or 9 years longer than the global average.
Norway also has the highest score of all the countries for Governance, a category gauged by assessing country corruption levels, political stability, and government effectiveness, and is in a three-way tie with Japan and Luxembourg in the Health category.
Second on the list is another European country, Switzerland, with an overall score of 80%. It’s the highest-ranked country for environmental factors, and it also has the highest overall score in the Finances in Retirement category.
A Regional Breakdown
While European countries dominate the top 10 in the ranking, how does Europe rank as a region as a whole? Before diving in, it’s important to note that the study actually breaks up Europe into two sections: Eastern Europe (grouped with Central Asia) and Western Europe.
|3||Eastern Europe and Central Asia||49%|
And from a regional perspective, North America comes in first place despite the fact no countries in the region made it into the top 10. North America only has two countries included in the ranking: Canada (#15) and the U.S. (#18), which both rank relatively high.
In contrast, Western and Eastern Europe have more countries to account for, which ultimately lowers their regional average.
The Future of Retirement
As longevity rises and the retirement aged population continues to increase worldwide, many countries are opting to change their pension policies in an effort to encourage people to stay in the workforce longer.
For instance, in 2018, people in the UK could claim their State Pension once they turned 65. By 2028, this age requirement will be raised to 67.
However, government intervention may not be necessary, as many people around the world are already staying in the workforce beyond the traditional retirement age (perhaps more out of necessity than choice).
How Do Americans Spend Their Money, By Generation?
This interactive graphic shows a breakdown of how average Americans spend their money, and how expenses vary across generations.
How Americans Spend Their Money, By Generation
In 2021, the average American spent just over $60,000 a year. But where does all their money go? Unsurprisingly, spending habits vary wildly depending on age.
This graphic by Preethi Lodha uses data from the U.S. Bureau of Labor Statistics to show how average Americans spend their money, and how annual expenses vary across generations.
A Generational Breakdown of Overall Spending
Overall in 2021, Gen X (anyone born from 1965 to 1980) spent the most money of any U.S. generation, with an average annual expenditure of $83,357.
|Generation||Birth Year Range||Average Annual Expenditure (2021)|
|Silent||1945 or earlier||$44,683|
|Boomers||1946 to 1964||$62,203|
|Generation X||1965 to 1980||$83,357|
|Millennials||1981 to 1996||$69,061|
|Generation Z||1997 or later||$41,636|
Gen X has been nicknamed the “sandwich generation” because many members of this age group are financially supporting both their aging parents as well as children of their own.
The second biggest spenders are Millennials with an average annual expenditure of $69,061. Just like Gen X, this generation’s top three spending categories are housing, healthcare, and personal insurance.
On the opposite end of the spectrum, members of Generation Z are the lowest spenders with an average of $41,636. per year. Their spending habits are expected to ramp up, especially considering that in 2022 the oldest Gen Zers are just 25 and still early in their careers.
Similarities Across Generations
While spending habits vary depending on the age group, there are some categories that remain fairly consistent across the board.
One of the most consistent spending categories is housing—it’s by the far the biggest expense for all age groups, accounting for more than 30% of total annual spending for every generation.
|Generation||Average Spend on Housing (2021)||% of Total Spend|
|Silent (1945 or earlier)||$16,656||37.3%|
|Boomers (1946 to 1964)||$21,273||34.2%|
|Generation X (1965 to 1980)||$26,385||31.7%|
|Millennials (1981 to 1996)||$24,052||34.8%|
|Generation Z (1997 or later)||$15,449||37.1%|
Another spending category that’s surprisingly consistent across every generation is entertainment. All generations spent more than 4% of their total expenditures on entertainment, but none dedicated more than 5.6%.
|Generation||Average Spend on Entertainment (2021)||% of Total Spend|
|Silent (1945 or earlier)||$2,027||4.5%|
|Boomers (1946 to 1964)||$3,476||5.6%|
|Generation X (1965 to 1980)||$4,694||5.6%|
|Millennials (1981 to 1996)||$3,457||5.0%|
|Generation Z (1997 or later)||$1,693||4.1%|
Gen Zers spent the least on entertainment, which could boil down to the types of entertainment this generation typically enjoys. For instance, a study found that 51% of respondents aged 13-19 watch videos on Instagram on a weekly basis, while only 15% watch cable TV.
Differences Across Generations
One category that varies the most between generations and relative needs is spending on healthcare.
As the table below shows, the Silent Generation spent an average of $7,053 on healthcare, or 15.8% of their total average spend. Comparatively, Gen Z only spent $1,354 on average, or 3.3% of their total average spend.
|Generation||Average Spend on Healthcare (2021)||% of Total Spend|
|Silent (1945 or earlier)||$7,053||15.8%|
|Boomers (1946 to 1964)||$6,594||10.6%|
|Generation X (1965 to 1980)||$5,550||6.7%|
|Millennials (1981 to 1996)||$4,026||5.8%|
|Generation Z (1997 or later)||$1,354||3.3%|
However, while the younger generations typically spend less on healthcare, they’re also less likely to be insured—so those who do get sick could be left with a hefty bill.
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