The New Wealth Scoreboard

[MasterBlaster]

How do you stack up to the 1 percenters...

If this hasn't already been posted, Scott Burns updated his chart using 2010 data. The chart shows (by age bracket) how much total wealth you need to have in order to be in certain tiers.


The New Wealth Scoreboard - Registered Investment Advisor

The Wealth Scoreboard is a bit different from other measures of wealth. Rather than just identify the kind of wealth one needs to be in the top 1 percent or some other level, this measure divides us into wealth groups by age. You can thank the research department at the Dallas Federal Reserve bank for doing the heavy lifting.
When it comes to net worth, a little age discrimination is only fair. Young people haven’t had time to accumulate wealth. Older people have had decades. To be in the top 10 percent of your age group in your twenties, for instance, you only need to have a net worth of $83,000. You’ll need more than 20 times as much, a handsome $1,955,000 to be in the top 10 percent if you are in your sixties.
Another thing to notice is that whatever your wealth level, it peaks in the same decade of life--- our sixties. The top 1 percent enjoy a peak wealth of nearly $11.7 million in their sixties while those in the top 1 percent in their eighties have a net worth of about $5.9 million. Ditto, those in the top 25 percent: Their wealth peaks at $712,000 in their sixties and falls to $514,000 in their eighties

 

[Mulligan]

I only beat Mr. Median on the scoreboard. But as long as my pension check keeps coming, I will be in hog heaven.

 

[NW-Bound]

Nice info. Better than earlier posted links on wealth statistics.

I agree 100% with this statement from the article:

While many people can get into the top 10 percent through high wages as employees, diligent savings, and fortunate real estate choices, the odds are that you will need to be a business owner--- or an employee blessed with good stock options--- to make it into the top 1 percent.​

One thing I noticed is that across all net worth groups, people's wealth maxes out at the age group of 60-69, then declines as people get older. I guess that's because they stop working in the 60s and start to spend down.

Because we are early retirees, perhaps our net worth peaks even earlier than the stats show, and goes downhill earlier too. Darn! I guess those lines in FIRECalc that go up and to the right may be more elusive than I hoped.

 

[rodi]

One thing I noticed is that across all net worth groups, people's wealth maxes out at the age group of 60-69, then declines as people get older. I guess that's because they stop working in the 60s and start to spend down.

Another thing I noticed was the big leap in networth - across all groups between ages 40-49 and 50-59. I wonder how much of that is due to inheritance? But then again, there's a leap between 30-39 and 40-49...

But the real dollar (vs percentage) is big between the 40-somethings and the 50-somethings.

 

[MasterBlaster]

Another thing I noticed was the big leap in networth - across all groups between ages 40-49 and 50-59. I wonder how much of that is due to inheritance? But then again, there's a leap between 30-39 and 40-49...

But the real dollar (vs percentage) is big between the 40-somethings and the 50-somethings.

I would suppose that is due to two factors.

1) Peak earnings years in an established career

2) The snowballing of diligent savings in prior years.

 

[rodi]

I clicked through the fed reserve data that the article was based on.
http://www.federalreserve.gov/pubs/bulletin/2012/PDF/scf12.pdf

I know it's been commented on before - but on page 17, it's pretty eye opening that the median net worth is going the wrong direction over time. This is true by age bracket and by tercile bracket.

 

[LOL!]

Another thing I noticed was the big leap in networth - across all groups between ages 40-49 and 50-59. I wonder how much of that is due to inheritance? But then again, there's a leap between 30-39 and 40-49...

But the real dollar (vs percentage) is big between the 40-somethings and the 50-somethings.

I read this over the weekend. What popped into my mind about the big leap in networths was the year these age groups started investing. If one started investing after 1982 but before 2000, then one should have a pretty nice portfolio. Outside of those years, not such a grand portfolio.

 

[NW-Bound]

That's a plausible explanation. Perhaps in another 20 or 30 years, people will look back to the "Lost Decade" and bemoan that they did not get to invest when stocks were "cheap".

I like this theory. Back to FIRECalc with those lines "up and to the right".

 

[David1961]

It's interesting to me that for all age groups, to be in the top 1% you need at least 5 times what it takes to be in the top 10%. Wonder what this scorecard would have looked like 30 years ago. Would the gap between 1% and 10% be so high?

 

[traineeinvestor]

One thing I noticed is that across all net worth groups, people's wealth maxes out at the age group of 60-69, then declines as people get older. I guess that's because they stop working in the 60s and start to spend down.

I suspect there is an element of gifting and estate planning going on as well for those whose assets are well beyond what they need for their own use and/or are wealthy enough to be subject to estate duties.

One thing I couldn't see in the article (or the linked older version) was whether these numbers include the value of entitlements like defined benefit pensions and paid for health care? These would be quite meaningful, especially for those lower down the curve.

 

[NW-Bound]

One thing I couldn't see in the article (or the linked older version) was whether these numbers include the value of entitlements like defined benefit pensions and paid for health care? These would be quite meaningful, especially for those lower down the curve.

I don't think so.

These must be assets like 401k, IRAs, bank accounts, and most importantly people's homes. The median for the 60-69 group is $221K. I suspect a big chunk of that is their homes, which most people already own by the time they retire.

The above number of $221K is about what I expect. I was most curious about the upper few percent, and these stats are the most informative that I have seen.

 

[dmpi]

Correct me if I'm wrong, but isn't the median of the top 10% really the 95-percentile point? And isn't the median of the top 5% really the 97.5-percentile point?

 

[audreyh1]

Very interesting, and nice reference data. Another great Scott Burns article. Thanks for posting about it!

It would have been nice to have the thresholds though.

 

[traineeinvestor]

I don't think so.

These must be assets like 401k, IRAs, bank accounts, and most importantly people's homes. The median for the 60-69 group is $221K. I suspect a big chunk of that is their homes, which most people already own by the time they retire.

The above number of $221K is about what I expect. I was most curious about the upper few percent, and these stats are the most informative that I have seen.

Apologies, I meant for my comment to apply to the people at the upper end of the curve - those with assets well beyond what they need and into the levels where estate duties start to bite. I will edit my post.

 

[NW-Bound]

Sorry. My reply was about your 2nd paragraph, not the 1st. I have fixed my post accordingly.

 

[photoguy]

Correct me if I'm wrong, but isn't the median of the top 10% really the 95-percentile point? And isn't the median of the top 5% really the 97.5-percentile point?

The way Burns has it worded, it is very confusing. I think the numbers are actually thresholds but maybe by "top 5%" he does mean the 97.5th percentile as you suggest.

I went back to the linked article to see if I could figure out what is going on. However, it doesn't look like the table presented in the web article is derived from any table in the Federal Reserve's bulletin. So I am not sure where he is getting the numbers from. Maybe he went back to the raw data.

 

[FIREd]

Thanks for the link!

 

[skyvue]

It's interesting to me that for all age groups, to be in the top 1% you need at least 5 times what it takes to be in the top 10%. Wonder what this scorecard would have looked like 30 years ago. Would the gap between 1% and 10% be so high?

Almost certainly not. Every other piece of data I have read has indicated the gap between the upper 1% (especially the upper 0.1%) and the median or middle class has widened greatly in the last 30 years.

 

[skyvue]

Another thing I noticed was the big leap in networth - across all groups between ages 40-49 and 50-59. I wonder how much of that is due to inheritance? But then again, there's a leap between 30-39 and 40-49...

But the real dollar (vs percentage) is big between the 40-somethings and the 50-somethings.

I would think having your children grown and out of the home would be a huge factor in starting to accelerate net worth in that timeframe.

 

[Andre1969]

The way Burns has it worded, it is very confusing. I think the numbers are actually thresholds but maybe by "top 5%" he does mean the 97.5th percentile as you suggest.

I went back to the linked article to see if I could figure out what is going on. However, it doesn't look like the table presented in the web article is derived from any table in the Federal Reserve's bulletin. So I am not sure where he is getting the numbers from. Maybe he went back to the raw data.

Just above the graph, it does mention "Because the figure is the median--- half have more, half have less--- for each group it is not a "threshold" figure; actual net worth can be less to be in each group."

I really wish they'd show the threshold figures in these types of charts, rather than just medians. As for me, I fall just above the median in the top 10% of my age bracket. So, does that mean I'm really at the lower end of the top 5%?

 

[sheehs1]

Interesting article and chart and probably hard to pull the data by age group.
Looking up the number of millionaires in the U.S. for 2010 and depending on the source it is either 3 million or 8 million. Anyone else have a better link for this info?

 

[ziggy29]

Interesting article. I guess "I am the 10%."

Seriously, though, I'm not a big fan of "net worth" as a barometer of financial security or retirement security unless the actuarial "cash value" of income streams like pensions, annuities and Social Security are included. Otherwise it's apples and oranges; someone with $10,000 in the bank and a $40K COLA'd pension may well be more financially secure than someone with a million bucks in the 401K.

 

[rodi]

I would think having your children grown and out of the home would be a huge factor in starting to accelerate net worth in that timeframe.

I'm sure you're right... but I always forget that since it doesn't apply to me (and many of my friends) I'm a parent who started the game late... I'm 50, hubby is 60, and we have kids in grades 4 and 6... so lots of spending on them, concurrent with our ER plans. Makes for interesting financial planning challenges. I guess likes attract - because many of the parents of my kids' friends are also "senior" parents.

 

[Alan]

Thanks for the link.

Another thing I noticed was the big leap in networth - across all groups between ages 40-49 and 50-59. I wonder how much of that is due to inheritance? But then again, there's a leap between 30-39 and 40-49...

But the real dollar (vs percentage) is big between the 40-somethings and the 50-somethings.

This made me look at our record.

We were age 45 in 2000.

In 2010 at age 55, when we retired, our net worth had gone up by a factor of 4.5.

In our case, the year 2000 saw our 2nd, and last, child go off the payroll, plus we were both earning the most we'd ever made and saving aggressively.

2000 - 2010 was hardly an impressive period in the stock market so if we had been in the same position in 1990 I think we'd be flying First Class now.

 

[FIREd]

Given that we only started working in 2000-2001, it's amazing that DW and I managed to be where we are after 2 recessions, multiple employer bankruptcies, 2 spectacular stock market blowups, and one unprecedented real estate market meltdown. We rank very high within our age group (30-39). But I think that, as we will soon transition to the next age group (40-49), it will be challenging to hang on to our current percentile. It's a pretty big step up from here, even with DW still working. It would require some decent return on assets and that looks unlikely in the current environment.