This was also from Liz Weston's article on MSN. Kind of a pain to do the calculation but I found the result interesting.
Also, accumulating a worth of 100-200% of your life time earnings says something about compounding and the time value of money.
Also, accumulating a worth of 100-200% of your life time earnings says something about compounding and the time value of money.
Step 1: Add up your lifetime earnings. You don’t have to go searching for your old tax returns; just use the handy summary Social Security sends you every year, a few months before your birthday. (If the “Social Security” and “Medicare” earnings columns show different amounts, use the Medicare column.)
Step 2: Calculate your net worth. This measure of wealth is basically the total of all your assets (investments and property) minus your liabilities (your debt).
Step 3: Divide your net worth by your lifetime earnings. This is what all your labor has achieved for you in terms of tangible wealth.
Rick Ulivi, a fee-only financial planner in Orange, Calif., likes to have his clients do this calculation. He wants to see the following ratios:
For young clients early in their careers, the desired ratio is somewhere between 0 and 25%.
For clients in midcareer, he wants a ratio between 25% and 100%.
By the time they’re ready for retirement, the preferred ratio is 100% to 200%.