Poll: net worth to lifetime earnings

[firewhen]

Net worth is obviously correlated to net income, but those who LBYM, and invest well, can save more than people who are much higher earners. I read about this statistic, and it would be interesting to see how everyone does with this. The simpliest way of determining lifetime net income is to pull out your annual Social Security earnings statement and add up the years. Use the Medicare column, as that income was uncapped in 1994. It was capped prior to that, so some lucky folks would need to estimate how much higher their income was in the earlier years.

So if your net worth (I guess using the definitions discussed in the earlier polls) is $1 million and your lifetime earnings is $2 million, that would be a 50% ratio. Conversely someone with a net worth of $800,000 but lifetime earnings of $400,000 would be at 200%, and somehow managed even after paying income taxes to have accumulated twice their lifetime earnings.

Also, if you are using family net worth I think you should add up the earnings from all the workers in the family who contributed to that.

[HFWR]

~ 38%

[Meadbh]

Tax rate is a really important variable here. For example, if you are Swedish, you may be paying 65% of your total earnings in income taxes. If you are Saudi Arabian, zero. (Of course, if you are a devout Muslim, you wouldn't expect a bank to pay interest).

[dex]

I'm assuming inflated dollars and not net present value dollars.
I entered 100% based upon inflated dollars.

I would guess the answer would be 50% or less if NPV was used.

[OAG]

Submitted for the last 30 years (2.5 to 1 ratio). Not sure prior to that.

[Moemg]

It was interesting how little I made when I first started working .Can't believe with that measley amount I still saved over 100 %.

[Donzo]

This was a very interesting question - I am amazed that my net worth to lifetime earnings(including equity in home and properties) is over 100%!

great example of compound interest and property value increases.......

[hellbender]

How do you want me to handle my inflation-adjusted pension in this calculation? The answer makes a huge difference in the result. Divide by .04 and add to portfolio?

[eyeonFI]

Interesting poll. I was surprised that my # came to 126%. It's the appreciation in my house value over the last 7 years that pushed it over 100, otherwise I'd be at almost exactly 100% - still surprising!

[firewhen]

I see this as a rough estimate. Obviously inflation, and investment/real estate gains make a huge difference in one's net worth. It still is amazing that so many of us can in essence have every dollar they ever made gross, even with taxes and the costs of everyday living. It just goes to show that saving early and often can lead to large gains down the road. Even so, no matter how diligent, you can only accumulate so much so fast, limited by your income. This ratio shows how you are doing versus that. I did not include a category above 200% because I did not think many people would exceed that, but a number of people are already there. This could go up even further for those in ER since the income is frozen and the portfolio could still grow.

For pensions, COLAed or otherwise, I think the 25 times multiple is reasonable to use for this purpose. Thanks everyone for participating.