You can live the American Dream, but it comes at a price.
According to the financial media site Investopedia, the total lifetime cost of realizing aspirations such as owning a home, driving a new car, raising children, and taking annual vacation amounts to $4.4 million.
That’s more than the average American earns in a lifetime.
But don’t despair. Financial advisors say the American dream is achievable, especially for families with two income earners and good savings habits.
I think we’ve been hearing a lot about the American Dream lately. At this summer’s Republican National Convention, Donald Trump vowed to “bring back the American Dream.” J.D. Vance cited the term six times during the vice presidential debate. Kamala Harris mentioned it during the last presidential debate.
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In a September report, Investopedia calculates the lifetime costs of typical American goals and aspirations, including homeownership, raising children, a lavish wedding, cars, vacations, pets, as well as a comfortable retirement and dignified funeral. I set out to do that.
American Dream: Itemized List
The breakdown is as follows: I’ll explain the math below.
Retirement: $1.6 million Homeownership: $930,000 Raising two children: $832,000 Owning a new car: $811,000 Annual vacation: $179,000 Wedding: $44,000 Pets: $30,000 $7,000 Funeral: $8,000
Investopedia has calculated the cost of the American Dream before based on our readers’ interests.
“We started this effort because American Dream was one of the most searched terms on our website,” said Caleb Silver, Investopedia Editor-in-Chief.
A previous American Dream report released in 2023 pegged the lifetime total at just $3.4 million. But Silver cautioned readers not to compare that report with the new report.
American Dream: Wants and Needs
That 2023 report focused on what we need: housing, cars, health insurance, retirement savings, and more.
Our new report focuses on what we want: new cars, not just cars. It’s not just a retirement, it’s a comfortable retirement. vacation. children. pet.
Readers can use the report to write their own plans to achieve the American Dream, Silver said. Maybe you don’t like vacations. Maybe you’re allergic to pets. You can choose items from a list, add or subtract, and calculate the cost of your American dream.
“Some people don’t want to have children,” Silver says. “Some people never want to get into a new car. Everyone’s price tag is different depending on who you are.”
Not many people have $4.4 million lying around. In fact, the median net worth of the top 10% of American households is approximately $3.8 million, according to the 2022 Federal Consumer Finance Survey.
But achieving the American Dream is a life’s work. According to Investopedia, the average American with a bachelor’s degree earns about $2.8 million over their lifetime. Add in a second income and that could easily reach $4.4 million.
Perhaps the American Dream report will inspire some readers to find a life partner. Indeed, financial advisers say the document is supposed to encourage readers to save and invest.
“The key takeaway from this report is the importance of having a comprehensive financial plan,” said Niv Persaud, a certified financial planner in Atlanta. “The downside is that this number can make people depressed and demotivated.”
Who has $1.6 million in retirement savings?
Some of the numbers in the Investopedia report are dizzyingly high. For example, few households have nearly $1.6 million in retirement savings.
But other elements of the American Dream may not cost as much as you think.
Consider a family home. Yes, you could spend almost $1 million over 30 years paying off your mortgage. But if it’s paid back, “you could end up with $1 million worth of assets,” says Laura Mattia, a certified financial planner in Sarasota, Florida.
Here’s the math behind the Investopedia report.
Severance pay: $1.6 million
According to Investopedia, the “recommended minimum savings” amount is $1.6 million over 20 years of retirement, based on the median income of a retirement-age household.
If this number seems high, consider that financial advisors typically tell retirees to withdraw only 4% of their savings each year for living expenses. And 4% of $1.6 million is relatively low at $64,000.
Home ownership: $930,000
This number reflects the average cost, including insurance and property taxes, of purchasing a home and financing it with a 30-year fixed-rate mortgage.
The median home price in America is just over $400,000. The remaining $930,000 comes from 30 years of interest, insurance, and taxes.
Raise two children: $832,000
This number covers the entire cost of raising two children to age 17 and then attending a public university at in-state rates for each of them for the next four years.
Investopedia estimates that the total cost of raising two children to age 17 is approximately $612,000. College costs push this number to over $800,000.
These costs partly explain why fewer Americans are choosing to have children.
New car ownership: $811,000
Car prices have soared since the pandemic began, to the point where a new car feels like a luxury.
According to Investopedia, the $811,000 figure reflects the total lifetime cost of paying for two new cars every month from age 29 to age 75. The report focuses on new cars “because they reflect the dream of always being behind the wheel of a new car,” even if it means higher monthly payments.
Fewer Americans seem to share that dream. The average age of a car in the United States is nearly 13 years, an all-time high. Driving an aging car may not represent the American dream. But from an economic perspective, this is a wise move.
“If you pay for the car, you get to enjoy it for free,” said Ronnie Golden, an economist at Penn State University’s Abington campus. “People can adjust and say, ‘I don’t need a new car yet.'”
Annual vacation: $179,000
If your American dream includes annual vacation, face the facts. A lifetime vacation would cost $179,000, reports Investopedia.
And this number sounds conservative. According to one consumer site, a modest family trip to Disney World currently costs $7,000.
Wedding: $44,000
Cost includes rings, ceremony, and reception.
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Pet: $37,000
According to Investopedia, nearly two-thirds of Americans own a pet. The $37,000 figure is the approximate lifetime cost of one dog and one cat.
Funeral: $8,000
You don’t have to pay for your own funeral. However, the report assumes that you do not want your heirs to inherit the property.
(This story has been updated to add new information.)