What is the average net worth by age? How does yours compare to others in your age group? What can you take away from these numbers? Tracking your net worth can help keep your personal finances in check since it measures your overall portfolio value and not simply your income. You could have a high income, but if you don’t save any of it, then that could be a dangerous situation come time for retirement. Seeing your net worth in comparison to others can help you make decisions about your investing strategies, your spending habits, and how aggressively you want to pay off debt or avoid it altogether.
What is Net Worth?
In the most basic of terms, it is a calculation of your assets minus your liabilities. There are some differing viewpoints on what should be included, especially in the asset column. Some include the value of their home, car, and life insurance policies. Some argue that one or more of those items shouldn’t be included. You can derive your asset column however you like, but I would caution to not over-inflate the number. In other words, don’t try artificially inflating your assets by including everything that you can think of. While your lawnmower technically has value, it probably shouldn’t be included as an asset. Here is a calculator that you can use to find your net worth.
Personally, I’d advise sticking to the major items. Include the value of things such as your retirement accounts, bank accounts, investment accounts, cash, your home, and collectibles such as art and coin collections. I would leave out depreciating assets such as cars and the value of household items like furniture, electronics, and power equipment.
On the other side of the equation is debt. Include all debt in this column. Mortgage, student loans, car notes, credit cards, lines of credit, etc.
Once you have added up everything you simply subtract your debts from your assets. The number that is left is your net worth. But what does it say, and how does it compare to others in your age group?
Let’s have a look at average and median net worth by age group.
Average = adding up all numbers and dividing by the number of samples.
Median = the middle number of all the samples.
Median will often give us a better representation especially where there are extreme outliers that can throw the numbers. This happens when looking at net worth since the top 1% have a net worth in the millions or even the billions.
Net Worth in Your 30’s
According to data from the Federal Reserve, the average net worth of families under 35 was $76,000 in 2016. The median net worth was $11,000.
If your net worth is coming in lower than that don’t worry. Time is on your side, and your 30’s are where you can lay a solid financial foundation that will carry you for the rest of your life. Now is the time to start paying off debt, saving for retirement, and developing sound financial habits.
A rule of thumb in your 30’s is to have a net worth that is equal to half of your annual salary. If you earn $50,000, then your net worth should be around $25,000. Keep in mind that this is just a general guideline.
Net Worth in Your 40’s
The average net worth for families between 35 and 44 was $288,000 in 2016. The median was just under $60,000.
People in their 40’s will often see a jump in their net worth as they purchase a home and as compounding starts to work in their favor in their retirement accounts.
The rule of thumb here is to have a net worth that is twice that of your annual salary. If you earn $50,000, then you should have a net worth of $100,000 at 40.
Net Worth in Your 50’s
The Federal Reserve shows that the average net worth between the ages of 45 and 54 was $727,000 in 2016. The median net worth was $124,000.
Now is the time to get aggressive about saving and investing as retirement is approaching. Pay down any remaining debt, avoid new debts, and max out retirement accounts to the annual maximums allowed by law.
The rule of thumb in your 50’s is to have a net worth that is equal to four times your annual salary. Our person earning $50,000 should have a net worth of $200,000 by the time they are 50.
Net Worth in Your 60’s
The average net worth for people aged 55 to 64 was $1,100,000 in 2016. The median net worth was $187,000.
It’s time to start planning for retirement. You may want to shift some of your investments to less aggressive or risky asset classes. You may also want to consider cutting living expenses by possibly downsizing your home. It is also a good time to investigate insurance policies should you be unable to work due to health issues in the final years leading up to retirement.
The rule of thumb in your 60’s is to have a net worth equal to six times your annual salary. Someone earning $50,000 a year should have a net worth of $300,000 by age 60.
Net Worth at Retirement
The average net worth for Americans between the ages of 65 and 74 was just over $1,000,000. The median was $224,000.
A good rule of thumb here is to have approximately 80% of your salary in savings for every year you are in retirement. The problem with that rule is that no one knows how long they are going to live. If you don’t have enough saved, then you will outlive your money. Therefore, it is critical to start saving and investing as early in life as possible.
A Few Final Thoughts
I personally feel that the proceeding averages are a little on the low end. I would strive to have a higher net worth in each of the age groups. For me to fully replace my income and live the life that I want to in retirement I foresee needing around $2,000,000. The average at retirement age is half of that.
These averages do serve as a decent measuring stick to track your own progress against your peers, however. How is your nest egg performing? Share below in the comments and share your age and net worth. What steps are you taking to ensure a happy and financially secure retirement?
Read Also:
Retirement Planning to Help You Retire Early
Do You Know Your Net Worth? Here’s How to Figure It Out
Say Bye to Your Job: 8 Financially-Savvy Ways to Prepare for Retirement in Style
Based in the Pittsburgh, PA area, Brian holds full-time employment as a Warehouse Manager for an electronics firm. Brian enjoys wealth building, investing, gardening and the great outdoors. Brian holds a B.A. in Environmental Studies from the University of Pittsburgh and an MBA from Robert Morris University.
