'Why is it so hard to make it in America?' Here's the true cost of the American Dream

How much does it cost to live the American Dream? More than most of us can afford, according to two recent studies.

A household would have to spend more than $150,000 a year to live the dream in 29 of the 50 states, according to an analysis published in April by the personal finance site GOBankingRates.

According to the report, the optimal American lifestyle would cost $137,842 a year in Ohio, $147,535 in Texas, $159,932 in Florida, $194,067 in New York and $245,723 in California.

And how, exactly, does one quantify the American Dream?

GOBankingRates defines the dream as getting married, raising two children and owning a home, a car and a pet. (You can almost imagine them tooling around in one of those little plastic cars from the Game of Life.)

The site ran the numbers for every state, factoring in a mortgage, annual healthcare costs, utilities, education, groceries, pets and childcare. After tallying the expenses, researchers doubled them, to account for discretionary spending and savings.

In Hawaii, the American Dream will cost you

Hawaii ranks as the costliest state, at $260,734 per year. Mississippi is least expensive, at $109,516.

Here’s a breakdown of costs in Illinois, a mid-priced American state, ranked as 26^th-least-expensive among the 50:

• Median home price: $255,278
• Annual childcare costs: $24,174
• Annual mortgage costs: $21,401
• Car costs: $8,709
• Grocery costs: $8,143
• Healthcare costs: $7,021
• Utilities costs: $5,278
• Education costs: $2,475
• Pet costs: $1,170
• Total annual costs: $78,369
• Full cost of the American Dream: $156,739

That total, $156,739, is more than most of us earn in a year. Median household income was $74,580 in 2022, according to the Census.

“Ultimately, this study highlights just how high of a hill Americans have to climb if they want to comfortably afford to live as a family of four,” said Andrew Murray, lead data content researcher at GOBankingRates.

What does living the American Dream cost in a lifetime?

Another report, released in December by the financial media site Investopedia, estimates what the American Dream costs across an entire lifetime: $3.4 million.

That is a staggering sum, Investopedia observes, considering what the average American earns in a lifetime: about $2.3 million.

Here’s how Investopedia breaks down the itemized costs of the American Dream:

• Lifetime costs of health insurance: $934,752
• Average home cost, plus mortgage interest: $796,998
• Cost of raising two children: $576,896
• Lifetime car costs: $271,330
• Lifetime costs of pet care: $67,935
• College costs: $42,070
• Wedding and engagement costs: $35,800
• Cost of two baby deliveries: $5,708
• Retirement costs: $715,968
• Funeral costs: $7,848

And many of those figures are low-ball estimates, said Caleb Silver, editor in chief of Investopedia.

The tab for lifetime car costs, for example, assumes you can live the American Dream while driving only used vehicles. The college-costs figure covers only one year at a public, in-state institution for each of two children.

“These are what we think are reasonable expectations for having a household in America today,” Silver said.

Investopedia prepared the report partly to feed reader interest: Many site visitors wanted to know what Investopedia had to say about financing the American Dream.

“The reason that the American Dream was one of our most-searched terms last year,” Silver said, “is that people thought it was further and further away from them.”

Runaway housing costs put the American Dream out of reach

If rising prices are pushing the American Dream out of reach for many Americans, perhaps nothing emblemizes that trend quite like the runaway costs of owning an American home.

The median sale price for an existing home rose more than 40% between early 2020 and mid-2022, topping out at a seasonal peak just over $400,000, according to the National Association of Realtors.

Home prices are still rising, albeit more slowly: Prices on existing homes rose 4.8% from March 2023 to March 2024.

And mortgage rates are twice as high now as in early 2022: 7.2%, as of May 2, compared to just over 3% at the start of 2022.

Mortgage rates rose in response to a campaign of dramatic interest-rate hikes by the Federal Reserve to tamp down inflation.

High rates and high prices have hobbled homebuyers. In one recent survey, published last month by BMO Financial Group, 71% of prospective buyers said they would wait until the Fed cuts rates before they enter the market.

“When you think of the American Dream, you think of, 'How do people become a part of this wonderful middle class?' They purchase a home,” said Kurt Carlton, president of New Western, a marketplace for investors to find houses to rehab or remodel, based in Irving, Texas.

Retirement costs are a red flag for many Americans

One red flag in the Investopedia report, Silver said, is the high cost of retirement. The estimated tab, $715,968, assumes a household will need 80% of the income earned from work for a 12-year retirement.

“By and large, people are not saving nearly enough for having that money when they stop earning a regular paycheck,” Silver said.

According to the Survey of Consumer Finances, the median household held $87,000 in retirement savings in 2022. Nearly half of households had no retirement savings.

Inflation has pushed up the costs of other components of the American Dream, including childcare, groceries and even pet care.   

'Child care desert':In this state, parents pay one-third of their income on child care

According to a Bankrate analysis of labor statistics, overall consumer prices have risen 20% since February 2020, a time before the recent inflation crisis.

The GOBankingRates study notes that annual grocery costs now top $9,000 in five states: Alaska, Hawaii, California, Washington and Oregon. Childcare costs exceed $20,000 in many states, and they top $30,000 in Massachusetts.

Young Americans aren't buying into the American Dream

Dwindling hopes of achieving the American Dream may be hitting younger Americans the hardest. They are struggling with the rising costs of college, childcare and especially buying a first home, a milestone many older Americans have already reached.

Two-thirds of Americans believe younger people face hardships that earlier generations didn’t, according to an online survey of more than 2,000 U.S. adults done for USA TODAY by The Harris Poll in 2023.

"Many younger generations have given up on the American Dream," said Grant Gallagher, head of financial wellbeing at Affinity Federal Credit Union in New Jersey. "With all of these headwinds, the American Dream is being redefined by the 30-and-under crowd as focusing on living their best life with what they have."