The New Wealth Scoreboard

[aida2003]

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Originally Posted by 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.

We're almost like above except that luckily we didn't experience layoffs personally and our mediocre house didn't really have much to lose in the housing meltdown.
With regards to the age groups, I guess we have to average age of the spouses. I'm in the 30-39 group, and my DH is in the next elder group. It feels great that we're doing quite fine...but only for a moment. All that wealth is on the paper anyway and who know what awaits us in the future (though hoping for the best certainly).

[Mulligan]

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Originally Posted by NW-Bound Why do we like to compare to our peers? Could it be simply for some personal assurance that when bad things occur, they will happen to our neighbors first? For example, in my home, when the rain is pouring, I feel smug knowing that I am on higher ground than my neighbors, although I myself may not be high enough. It's just a human thing. It's worse than flying below the radar. In the Great Recession of the 2007-2009, didn't we feel more like flying a nap-of-the-earth mission? And at night, even squeezing between trees? In fact, some of us didn't make it, like the following pilots. Pilot: Think I can make it between there? Copilot: Nope! Pilot: Oh ye of little faith. Look how big that is. Copilot: Oh sh*t! Pilot: Damn! Copilot: Mayday! Mayday! Pilot: I've got it, I've got it... Oh Ye of little faith AH-64 Apache Crash - YouTube

I am glad its a human thing and not just a self centered Mulligan thing. My first thought was, Im not doing so well compared to others. Then I smugly thought I bet most don't have as good of pension as I do though. Unrelated, your "smug" comment reminded me of last night when I was walking outside with GF. A dog was lose from his house and came charging and barking at us. She was getting nervous and I smugly commented that I didn't have to outrun the dog, I only had to outrun her.

[NW-Bound]

You are supposed to keep that in thought, and not commenting out loud. You are in trouble now, my friend.

But then, some animals may have an instinct to give chase. Next time, run and see what the dog will do.

[obgyn65]

I agree with this.

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Originally Posted by dmpi The numbers as presented are confusing. It would have made much more sense to present threshold numbers into each of the categories.

[Huston55]

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Originally Posted by ziggy29 My point was simply that "net worth" isn't the most accurate barometer of overall financial security because it doesn't factor in the real value of income streams that have no actual cash value.

+1

For example, DW and I are in the top 10% according to these tables but, I estimate that almost half of our retirement income will (at some point) come from SS and a pension. And, these COLAd income streams are the only reason that FIRECalc and Fido RIP tell us that we can retire; because our "assets" alone would not support a financially stable retirement at our desired income level.

This is illustrated by the data in Fed Survey. Comparing the median net worth of percentile groups or age groups reveals that they (even the top 10%ers) have no where near the assets required to support their respective median income.

For example, comparing median NW to median income for the 80-90%, the 90-100%, and the 55-64 yrs groups, shows that their NW is only 3-6 times their income. Crudely saying the prospective retirees need only 50% of their preretirement income (a stretch) would result in NW/income ratios of 6-12 - which is still 2-4 times less than required for a 4% SWR.

I know that this NW/income comparison is somewhat influenced by high late-in-life income compared to actual expenses (higher % going into savings) but, even factoring that out doesn't make it mathematically possible for these well off groups to live solely on their assets.

Some conclusions:
1. Thank goodness for SS, and even a small DB pension if you have one.
2. A stable retirement is difficult at "normal" age, much less early, even for those in top income brackets.
3. Joe Dominguez was right - LBYM is the only way.

[gerntz]

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Originally Posted by 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.

That plus I'd guess gifting to charity & heirs vs. gifting to Uncle Sam when you die plays into it. Look at Buffett & Gates giving to Gates Foundation.

[gerntz]

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Originally Posted by 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?

NW growth with age and percentile is quite exponential.

[NW-Bound]

Yes, the growth of net worth in the age group of 50 through mid 60 is very high. It all makes sense when we think of how much money people can put aside in those years, when their children have left the home and college tuition is done with, their houses paid for, all the toys already purchased (and gotten tired of even). And yet, this is the time when people are at the peak of their careers, commanding highest salaries in their work life.

It is tough to walk away from all that money! I have had much deliberation with myself, much soul searching. And I had the luxury of easing into retirement, so I can get used to it, and not like most people who had to quit cold turkey from the steady cash flow from their employers.

No, ER is certainly not for the faint of heart.

[Grainiac]

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Originally Posted by NW-Bound Yes, the growth of net worth in the age group of 50 through mid 60 is very high. It all makes sense when we think of how much money people can put aside in those years, when their children have left the home and college tuition is done with, their houses paid for, all the toys already purchased (and gotten tired of even). And yet, this is the time when people are at the peak of their careers, commanding highest salaries in their work life.

Makes sense alright, but only if it makes sense to w@rk past 50.

[HillCountry]

Is this the first time net worth is profiled with age?

I am not sure people in 40 today can grow their wealth to that level of 60 after 20 years.

The early baby boomers have better economic environment for them to grow wealth.

[ziggy29]

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Originally Posted by HillCountry Is this the first time net worth is profiled with age? I am not sure people in 40 today can grow their wealth to that level of 60 after 20 years. The early baby boomers have better economic environment for them to grow wealth.

It's hard to say. A lot of depends on the economy and market cycles, and that depends on, well, the "birth lottery" and being born at the right time.

If you're born in (say) 1940, you hit your peak earning and saving years during a long, explosive bull market -- and by 2000 at age 60, if you lived below your means and invested appropriately, you probably saw a massive spike in net worth from 40 to 60. If you started to become significantly more conservative by the time you were 60, you took a fair bit of those gains "off the table" before the Ursa Major descended on us.

People born in 1960, on the other hand, started a horrible run for investing when they hit 40. Yes, it's still possible they can enjoy a bull run at some point in the future, but demographics and economic drags don't make that feel very likely. Their only saving grace might be that they still have to invest aggressively at an older age because their current retirement nest egg just hasn't grown as much as it needs to.

It's made even worse by reading the tea leaves and realizing that the 1960 person isn't as likely to get as good a retirement deal from employers or the government as the 1940 person anyway.

I guess I was lucky (or prescient) despite the relatively bad timing of my birth. I was aggressively saving into my 401K since the late 1980s, putting 10% or more of my income into the market while it still had a decade to shoot up. I didn't trust business *or* the government to honor the deals they had made with me regarding the pension or Social Security (as we know it today). That is the *only* reason I have a good chance to retire well before 60 today. If I didn't do that -- if I assumed SS and Medicare as we knew it would be strong and solvent for me, not watered down, if I assumed my first Megacorp employer would never freeze my pension before I really had a chance to grow it much, if I used this as a rationalization that I'd have a comfortable retirement at 55 without needing to grow my own personal retirement savings -- I might not ever be able to retire.

[engprodigy]

I figured I was doing well compared to my peers but didn't realize I was 1%'er... I have a feeling in a few years I'll be demoted to 5% though

I've always been curious about networth based on age since at my age looking at national averages is pretty much pointless...

As far as why we "compare", I figure it is a biological thing, competition is what drives life throughout the animal kingdom, we just apply it in more ways than passing on genes and eating

[NW-Bound]

If you get to the 1% based on just your income and no inheritance, it is impressive no matter at what age. I just looked and the 1% median for the age group of 20-29 is $425K. I did not get to that net worth level until I was in my mid 30s.

[Amethyst]

I think the richer folks get even richer in their late 50's and 60's, due to inheritances. One of my work peers has lived above her means throughout her career - maids, vacations, constant eating out, you name it - because she can count on several million dollars in inheritance. Sometimes she bemoans not having much in the bank, and I just keep my mouth shut and make sympathetic noises.

As for us, we don't care where we fall on a scoreboard. The only scoreboard that matters is where we can afford to live. We have the LBYM lifestyle. We'd prefer to live in a location and home that is technically "higher" than our means.

Amethyst

[Huston55]

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Originally Posted by engprodigy I figured I was doing well compared to my peers but didn't realize I was 1%'er... I have a feeling in a few years I'll be demoted to 5% though I've always been curious about networth based on age since at my age looking at national averages is pretty much pointless... As far as why we "compare", I figure it is a biological thing, competition is what drives life throughout the animal kingdom, we just apply it in more ways than passing on genes and eating

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Originally Posted by NW-Bound If you get to the 1% based on just your income and no inheritance, it is impressive no matter at what age. I just looked and the 1% median for the age group of 20-29 is $425K. I did not get to that net worth level until I was in my mid 30s.

Being a 1%er at 29 is a distinct advantage and something to build from. You're well on your way to FI. The slow, steady road is the sure one.

When I was 29, I had a DW in school and was still in the military, as well as being in the bottom right cell of this table. I've worked my way up and to the left as I've aged but, could probably have saved more when I was younger.

Use your early lead to your advantage, and stay in the top 5%.

Remember, a 100% probability of a 5% return is MUCH better than a 50% chance of 10% return; Vegas was built on us not knowing that.

[engprodigy]

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Originally Posted by NW-Bound If you get to the 1% based on just your income and no inheritance, it is impressive no matter at what age. I just looked and the 1% median for the age group of 20-29 is $425K. I did not get to that net worth level until I was in my mid 30s.

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Originally Posted by Huston55 Being a 1%er at 29 is a distinct advantage and something to build from. You're well on your way to FI. The slow, steady road is the sure one.

I was taught to save, invest and live beneath my means growing up and it stuck I suppose. I'm not as frugal as my folks, but I'm still pretty cheap

I was given a fairly nice college graduation present from my parents since they didn't have to pay tuition etc and it went toward a car. Since then my networth is all from my income.

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Use your early lead to your advantage, and stay in the top 5%.

That is my plan, I have no illusions of remaining a 1%'er, but 5% sounds pretty nice

[heyyou]

All of the above is the answer to the asset boom for pre-retirees. For most here, the markets went up on cue with peak savings (no mortgage, kids grown) and the savers already had many multiples of their retirement spending. It is luck, but the luck of having saved five or ten multiples of your retirement spending at the start of a boom.

For me, it was much easier to get from ten multiples to twenty, than it was to get from none to one or two multiples saved while carrying a new mortgage. Yes, it took much longer to double ten, but the routine was set, and the goal was seen as being achievable with adequate patience.

[NW-Bound]

Hey, wait a minute. The Fed survey used in the article was dated 2010. From when I was 35 to 2010, that's almost 20 years. I just looked up the inflation in that time span, and it was 60%. That's huge.

Now, the $424K threshold in 2010 would be worth only $424/1.60 = $265K when I was 35. Heck, I did a lot better than I first thought.

How's that for a competitive spirit?

[ShokWaveRider]

Nowhere near the top 1% for our age.... $10m would be nice....

Wonder where the top 5% fall? I would say we fll in there some place.

[photoguy]

The threshold to make it into the top 5% should be the number in the 10% column. I.e., the median of the top 10% is equal to the 5th percentile.