Buying a home, raising children, and enjoying a secure retirement—commonly known as the American Dream cost—now requires approximately $5.32 million over a lifetime, according to recent financial data.
Rising Cost of the American Dream
According to a recent analysis by financial information firm Investopedia, the total cost to achieve the American Dream this year reached $5.32 million. This is an increase of over $208,000 from last year’s $5.11 million, marking a 4.1% rise in just one year.
This growth rate outpaces wage increases. Data from the U.S. Bureau of Labor Statistics (BLS) shows that wage growth over the 1-year period ending in June was limited to 3.1%.
There is also a wide gap when compared to lifetime earnings. An analysis of U.S. Census Bureau data by Investopedia reveals that a full-time worker with a bachelor’s degree earns approximately $3.6 million before taxes between the ages of 25 and 64. Even when adding 20 years of average Social Security benefits, the total comes to only $4.1 million, falling short of the American Dream’s realization cost by about $1.2 million.
Housing and Childcare Drive Expenses
Housing purchases drove the overall cost increase. Assuming the purchase of a single-family home with a median price of $420,000 using a 20% down payment and a 30-year mortgage at an interest rate of 6.32%, the lifetime cost of homeownership rose 7.7% from $1,184,000 last year to $1,275,000 this year.
The cost of purchasing a home, including principal and interest, is estimated at about $837,000, while property taxes, insurance, maintenance, repairs, and utility bills are estimated at roughly $438,000.
Childrearing and college education expenses recorded the steepest increase, jumping 8.9% from $876,092 last year to $953,763 this year.
The cost required for a couple to live for 20 years after retirement is $1,205,119. Meanwhile, the lifetime cost for purchasing two vehicles, insurance, maintenance, and fuel is tallied at $1,205,627.
Additionally, lifetime expenses for taking annual vacations increased by 3.5% to $186,999, and pet ownership costs rose by 3.5% to $40,772. Wedding expenses increased by 1.6% to $38,800.
In contrast, medical expenses were the only category to decrease. Lifetime medical expenses dropped 0.2% year-over-year to $413,271.
