Interesting Net Worth article

[Al18]

I just came across an article titled The Average Net Worth For The Above Average Person and found it very interesting. There are many articles in the main stream press about how the average net worth for someone in their 50's is between $100,000 and $180,000. I found this article posted on the Financial Samurai very different, as it discusses many habits that users on the ER forum (including myself) exhibit. My net worth is in the low range discussed in this article. How do you compare?

The Average Net Worth For The Above Average Person | Financial Samurai

 

[Alan]

The last net worth poll done on this site, that I could find, is here, so you can see how the members stacked up against that article except that age is not shown.

http://www.early-retirement.org/forums/f28/net-worth-poll-55244.html

 

[Ed_The_Gypsy]

I am not in that cohort.

Home equity is on the low end. Almost zero after-tax assets. Off the low end of the chart of IRA/tax deferred assets.

I don't think I will be invited to his parties.

Good thing I like my high-paying job!

 

[Bestwifeever]

What a funny definition of what an above average person is, in that article. I am not only sure that DH and I are not that person, I am more sure I never want to meet one.

 

[Keim]

Funny definitions. But, hit my age and networth almost exactly.

 

[scrabbler1]

Although the split among the 3 categories is somewhat different for me, I am slightly above the NW for an "above average" 50-year-old. Funny definitions, I agree.

 

[GrayHare]

Different way to define things. I'd expect most people here would match more than half of the definition list.

 

[plex]

Somewhat interesting list of things that can help make a person successful. The last net worth chart sort of puts it in perspective though, the "above average" net worth person he is describing is basically someone in the top 2-5% range, at least if you compare it the chart that Scott Burns put together that shows the percentiles for net worth by age group, that is getting near the "extremely above" average range in my opinion. So it is worth shooting for, but it needs to be put in perspective, this isn't just somewhat above the 50% mark, it is way above the 50% mark. Really, someone just above average would have a net worth around the "median" amount Scott Burns lists, which since it is an average, approximately represents the amount someone at the top 25% mark would have had in 2010.

The one other thing I didn't really like was him presenting renting as a "-100% loss," in a way, that is somewhat true to a degree, but at the same time, owning a home comes with all sorts of costs, and by renting, you are able to avoid those costs, in some areas, those housing costs actually end up resulting in making owning a home more expensive.

Relevant Scott Burns article:

AssetBuilder - The New Wealth Scoreboard - AssetBuilder Inc., Registered Investment Advisor

 

[growing_older]

His idea of "average" is to make something up based on a bunch of unsubstantiated assumptions. He even assumes that people 50-65 should have been saving in 401k since the beginning of their careers at the now current limits, which were not in force for most of their working lives. In short, it's a bunch of handwaving assumptions backed by numbers he made up and put in a spreadsheet. I don't see any useful comparisons possible from this fiction.

 

[Amethyst]

I always get a kick out of the comments that follow an article like this one. You get the impression that certain people are chagrined that they don't match the charts - as if a general chart could ever be expected to reflect exact, real individuals. Or as if there were a prize for having the net worth that the chart says you should have, and the commenters are worried they won't be in the line-up when the trophies are given out.

Amethyst

 

[nun]

The definition of "Above Average" is bizarre and doesn't seem to be much related to finances. The assumptions about savings and investments necessarily dictate the conclusions; ie if you earn a lot, save a lot and pay off a mortgage you will have an impressive networth.

I don't see any value is constraining your sample to those with above average salary, applying some prudent financial strategies and and then conclude that they have above average networth. Maybe the Financial Samurai should commit harakiri.

 

[LOL!]

His idea of "average" is to make something up based on a bunch of unsubstantiated assumptions. He even assumes that people 50-65 should have been saving in 401k since the beginning of their careers at the now current limits, which were not in force for most of their working lives. In short, it's a bunch of handwaving assumptions backed by numbers he made up and put in a spreadsheet. I don't see any useful comparisons possible from this fiction.

Sorry, but I do not believe he assumes that folks have been saving at the CURRENT limit. If so, they would have even lots more money in the 401(k). I have been maxing out 403(b)/401(k) contributions since around 1987 or 26 years and my numbers are within his range even with sub-par employer matching. So are my spouse's numbers.

As for Bestwifeever's statement about not wanting to meet such an average person, I must say I am surprised by that statement. There was nothing particular unlikeable in any of his criteria. Indeed, they seemed pretty average to me.

OK, except for maybe this one:

7) Welcomes constructive criticism and is not overly sensitive from friends, loved ones, and strangers in order to keep improving.

Or maybe he edited his criteria between when Bestwifeever read them and when I read them?

 

[photoguy]

The numbers presented are not an average of anything as that would imply the author (or someone else) actually made measurements for the defined population and took the average. Rather this is [-]a stupid wild ass guess[/-] an informed estimate.

 

[Gumby]

What a funny definition of what an above average person is, in that article. I am not only sure that DH and I are not that person, I am more sure I never want to meet one.

"Men possessed of money, like men earlier favored by noble birth and great title, have infallibly imagined that the awe and admiration that money inspires were really owing to their own wisdom and personality. The contrast between their view of themselves, as so enhanced, and the frequently ridiculous or depraved reality has ever been a source of wonder and rich amusement."

John Kenneth Galbraith
Money: Whence it Came, Where it Went (Houghton Mifflin Co., 1975) at p. 4.

 

[NW-Bound]

Well, I only glanced through the article, and did not see anything outrageous in the list of 11 "qualities" of the "Above Average Person".

Still did not see how those not-so-unusual qualities would be tied to a certain net worth. I myself have been doing quite OK financially, because I was good in what I did (this I can claim credit for), AND fortunately was in a field that was well rewarded (this was luck). I could be a jerk, and as long as I was careful not to piss off people I did my work for, I would get the same financial reward.

So, what's the point?

 

[Al18]

Looking back over the list of 11 qualities of the 'above average person' - some don't seem to make much sense. Especially odd is #4: Largely depends on themselves, as opposed to mom and dad or the government. I don't know why the author seems to be ruling out government employees.

 

[NW-Bound]

I think by dependence, he means financial assistance or handout such as welfare, and not a paycheck.

 

[Bestwifeever]

?...As for Bestwifeever's statement about not wanting to meet such an average person, I must say I am surprised by that statement. There was nothing particular unlikeable in any of his criteria. Indeed, they seemed pretty average to me. OK, except for maybe this one: Or maybe he edited his criteria between when Bestwifeever read them and when I read them?

I don't know where he came up with his definitions as he apparently just made them up, but they just struck me as something Mr. Collins might have proclaimed in Pride and Prejudice, especially with the explanatory phrasing after each one, the "becauses." I would hope the above average person might be kind and funny and gracious and thankful.

The definitions themselves really have nothing to do with the statistical net worth tables later in the article, which I believe are based on something published by CNN. Eta: reading the article more closely, I see the tables have no source notes so I think he is just creating his own ranges. Or something.

 

[RobLJ]

Looking back over the list of 11 qualities of the 'above average person' - some don't seem to make much sense. Especially odd is #4: Largely depends on themselves, as opposed to mom and dad or the government. I don't know why the author seems to be ruling out government employees.

A lot of wealth is also inherited, so I don't know why the author seems to rule out that. Not that this is relevant to those on the FIRE blog.

 

[heikejohn]

Always thought of our finances as "above average". After reading the article, we are 50% below the average net worth for our age.

 

[Throwdownmyaceinthehole]

Ha, and those tables are for individuals, not couples, clicking thru to the couples article, we are deadbeats.

 

[Masquernom]

His criteria matches a lot of the engineers I work with. Just replace his description with "well employed nerd" I guess. I'm within a few thousand dollars of his net worth at age 55. I graduated college at 24 instead of 22, and never maxed my 401K. So I can assure you, his numbers are achievable.

My company entered bankruptcy once for a brief time. It was rumored we might not get a pay check for one monthly cycle because of that. I was surprised how many of my fellow engineers were panicked at the thought of having to miss one paycheck.

I think we're divided into two groups at work. Some LBYM and save a lot, some live paycheck to paycheck about. I remember being surprised when people early in their career talked about borrowing from their 401K. I guess it's spending habits you develop growing up.

 

[eta2020]

Pre Tax savings look high. Post tax savings look low.

I would expect many "above average" people to be in school most of their 20s and hence they may have nearly nothing saved up at age of 30.

 

[eta2020]

And BTW if above average person buys a $250,000-$500,000 piece of property at 27. So couple buys 500 to 1 Milion dollar house (as article writes) IMO that person/couple will pay huge mortgage, insurance, taxes and most likely will fail building large income producing assets (stocks, Bonds, CDs)

 

[BobMax]

I would have been more impressed if the author would have tied "financial success" back to individual spending. He alludes to the importance of this in his early comments but does not follow-up IMHO. Afterall, a person who has determined they are happy on a $10K/yr spending rate and has $500K savings is more "successful" than the person who has determined they need $500k/yr spending and has $5,000K in savings.