, NET WORTH BY AGE – LoveHealthFinance

NET WORTH BY AGE – LoveHealthFinance

NET WORTH BY AGE – LoveHealthFinance

You are 32 years old and you have been working since you were 22 years old. When you started working 10 years ago, your income was $45,000 a year. Today, you make $100,000 a year. What should your net worth be and where do you stack up?

Knowing your net worth is one of the best ways to know if you have saved enough for retirement. A fear for many Americans is not having enough saved and invested when they retire. And the amount needed for retirement continues to increase. When it comes to saving and investing for retirement, the most important thing is start early.

Saving and investing must start in your 20s or whenever you enter the workforce. Also, you have to meet the net worth benchmarks to ensure you will have enough to retire. For some who save and invest to the extreme by living frugally, they will be able to retire in their 40s if not earlier. And being able to retire early all comes down to net worth.

What is Net Worth?

Net worth is total assets less total liabilities. When calculating total assets, certain assets like cars, furniture, jewelry, etc. are excluded and only home equity and portfolio investments (cash, stocks, bonds, etc.) are included. Think of net worth as a snapshot of your overall financial health. It is not the only factor in determining your financial success or failure. However, it is a great way to track your progress and assess whether changes are needed to stay on target with your financial goals.

Average and Median Net Worth by Age

The numbers on the average and median net worth by age vary by source as shown below.

Age Group Source Average Net Worth Median Net Worth
20s Personal Capital $96,514 $10,214
20s Bankrate $56,984 $6,500
see below NerdWallet see below see below
30s Personal Capital $369,493 $88,908
30s Bankrate $174,002 $32,600
less than 35 NerdWallet $76,300 $13,900
40s Personal Capital $859,463 $260,792
40s Bankrate $457,783 $93,460
35-44 NerdWallet $436,200 $91,300
50s Personal Capital $1,352.564 $439,840
50s Bankrate $998,416 $152,400
45-54 NerdWallet $833,200 $168,600
60s Personal Capital $1,724,581 $608,346
60s Bankrate $1,121,534 $221,200
55-64 NerdWallet $1,175,900 $212,500
70s Personal Capital $1,687,852 $538,489
70s Bankrate unavailable unavailable
65-74 NerdWallet $1,217,700 $266,400
80s Personal Capital $1,508,976 $451,822
80s Bankrate unavailable unavailable
75+ NerdWallet $977,700 $254,800
personalcapital.com, bankrate.com, NerdWallet.com

The median net worth is a more representative figure as it eliminates outliers. For example, 10 individuals have the following net worth: $10,000, $45,000, $50,000, $55,000, $60,000, $60,000, $60,000, $65,000, $65,000, $1,000,000. If we were to take the average, the $1,000,000 net worth would skew the average to $141,000. However, the median net worth would be $60,000 which is more representative of the group.

Average Net Worth for the Above Average Person

Why settle for average? FinancialSamurai argues that if you’re an above average person, then the numbers above don’t apply to you. The website lists 12 factors for what makes a person above average including someone who graduated college, went straight to work in trades after high school, or owns a business, someone who has little to no debt, someone who doesn’t spend more than they make, and someone who understands the power of inflation.

Based on those factors, someone who is 30 years old, has been working for 8 years, and invested early should have $350,000 in 401k savings. Compare that to the $174,000 net worth according to Bankrate. And according to FinancialSamurai, someone who is 65 years old, has been working for 43 years, and invested early should have $8 million in 401k savings. That is $6 million more than any of the other figures.

It may be hard to imagine $8 million in 401k savings. However, the numbers do add up. And that doesn’t even include the value of your home. So let’s not settle for average.

What’s Your Worth?

You make $100,000 a year. However, you recently purchased and financed a new car worth $60,000, you pay $3,000/month to live in a high-rise apartment, and you go out every weekend. Despite your high salary, your net worth after 10 years is only $10,000 due to high spending and low saving and investing.

In contrast, someone making $60,000 a year is able to save half of their income by living well below their means. And every year, they invest $20,000 in an index fund. After 10 years and an average rate of return of 4 percent, that investment is worth $270,000. 20 years from now, that investment will be worth $1.2 million.

How much money you make doesn’t matter if you don’t know how to save and invest it. That person you see driving a Bentley and wearing designer clothes may look rich but their net worth may be far less than your neighbor with a beat up pickup truck in the driveway but has been operating his own lawn gardening business for decades and investing in the stock market just as long. The truly wealthy don’t have to prove anything.

Source link