As Good as It's Going to Get

By Age 40, Your Income Is Probably as Good as It's Going to Get

By Kevin Drum

By age 40 you're done. That's the conclusion of a report from the New York Fed that looks at lifetime earnings from age 25 through retirement. The charts on the right tell the story.

The top chart shows average earnings by age. It's a little hard to immediately see how dramatic the income peak is since the y-axis shows the log of earnings, but if you do the arithmetic it demonstrates that, on average, by age 40 you're within about $1,000 of your peak earnings. You'll get inflation adjustments after that, but for the bulk of us, that's it. Real earnings pretty much plateau after age 40.

The bottom chart illustrates this in a different way. The yellow rectangle shows earnings growth for the bottom 80 percent. The blue line is for ages 25-35, and there's a fair amount of earnings growth except at the very bottom. The red line is for ages 35-45, and it's pretty close to zero. There's virtually no earnings growth for anyone. And the green line is for ages 45-55. It's actually negative. If you put the latter two age groups together, the report concludes that "average earnings growth from ages 35 to 55 is zero."

Now, outside the yellow box we have the top 20 percent: the well off and the rich. Those folks show a lot of earnings growth when they're young, but they also show fairly healthy growth between ages 35-45.

And the top 1 percent? That's on the very far right, and as you can see, they show earnings growth at every age level.

None of this will come as much of a surprise to anyone, but I thought it was interesting to see it in black and white, so to speak. If you're planning to make your fortune, you'd better do it by age 40. With only a few exceptions—and those exceptions are mostly for people already making a lot of money—you're done by then. Your income just isn't likely to ever go up much after that.