NET WORTH FOR ONE'S AGE

[gary]

What is a reasonable net worth for one's age?

For example I know of someone who is single at 40 with a mill, a career couple worth $400,000 at ages 31, or an executive couple 49 and 42 worth $1.9 mill. Are each of these people typical, above average, or below?

What are people on this threat worth and at what age? Net worth is the question, not income, or investment scenarios.

This would be interesting to set the stage for those who need to reach some goals or relax and chill about approaching ER.

 

[John Galt]

Net worth is my main indicator of how we are doing.
The "hope" right now is to keep it where it is
indefinitely. Anyway, I have been married for 37 of the last 40 years, so my numbers are for 2 people. I peaked
in 1998 (year of my divorce - nice for my ex.) at about
500K. It was roughly a 50/50 split of assets, so I started full
retirement with about 250K at age 54. I know this sounds incredible, but it was not even all that hard to do. My net worth went up every year until 2004.

JG

 

[peggy]

I just turned 37 yesterday; DH will be 44 in May.

As of December 31, 2004, net worth was about $400,000.

 

[nearly50]

According to the Fed, in 2001 the median family net worth was $86100. According to age, the median net worth was

<=35 $11600
35-44 $77600
45-54 $132000
55-64 $181500
65-74 $176300
>=75 $151400

In 2005, I suppose that these values could be increased by 30 to 40%, but the examples you cited are well above median.

 

[ER@50]

According to the Fed, in 2001 the median family net worth was $86100.  According to age, the median net worth was

<=35   $11600
35-44  $77600
45-54  $132000
55-64  $181500
65-74  $176300
>=75   $151400

In 2005, I suppose that these values could be increased by 30 to 40%, but the examples you cited are well above median.

I find the Fed numbers WAY off (too low). Given those numbers, NOBODY would be ERing.

Getting back to the original question...What are people's net worth on this threat and what age?

 

[Cut-Throat]

I find the Fed numbers WAY off (too low). Given those numbers, NOBODY would be ERing.  

Actually these numbers may be too high! - They might include home equity.

This is one reason why I also believe that Social Security is not a 'Crisis' - And I agree with you NOBODY (Or a very small minority - Us ) Will be retiring. The masses will continue to work and pump money into the SS system.

 

[John Galt]

Those net worth numbers look HIGH to me based
on similar studies I have seen. Remember, those are
the median. Anyway, I don't find them the least
surprising.

JG

 

[GTM]

The book the Millionaire Next Door has 3 catagories for net worth.
It is based on age and annual income.

A 50 year old earning $75,000 per year may be a


UAW Under Accumulator of Wealth Net Worth < 187500

AAW Average Accumulator of Wealth 187500 < Net Worth < 750000

PAW Prodigious Accumulator of Wealth Net Worth > 750000

 

[Louis]

For example I know of someone who is single at 40 with a mill, a career couple worth $400,000 at ages 31,  or an executive couple 49 and 42 worth $1.9 mill.  Are each of these people typical, above average, or below?  

Let's do further analysis of your examples and assume that each person starting 'working' at 23 years of age.

1. single at 40 with a million: has essentially 'saved' or accumulated $58,823/yr (1 million divided by 17 years of work)
2. career couple worth $400,000 at 31: has 'saved' and accumulated $50,000 together ($400,000/8 working years) or to compare apples and apples...$25,000 each;
3. executive couple 49 and 42 worth $1.9 mill: has 'saved' and accumlated $73,076/yr together and approximately $36,000/year each (the individual calculation is more difficult to calculate given the differences in age).

Hence to sum up your 'friends', your single 40 year old is accumulating the most on an individual basis($58,823/yr), while the executive 49/42 couple accumulating the most together at $73,076/yr.

All in all, I think they are doing very well indeed!

 

[Calgary_Girl]

I am 32 and hubby turned 35 last month. Our net worth is $800,000.

 

[brewer12345]

Getting back to the original question...What are people's net worth on this threat and what age?

None of your business.

 

[Hyperborea]

What are people on this threat worth and at what age? Net worth is the question, not income, or investment scenarios.

Income is definitely a big factor.  If the "basic" cost of living is $x in a place and a person makes exactly $x they have nothing left over to save or invest.  If that person instead makes $5x and even if they live better than "basic", perhaps at $2x, then they have $3x per year to save/invest.  They can probably retire early if they want.  The person making $x / year will not be able to ER even if  they are able to cut below basic living costs.  If you want to ER you will need to make a lot of money and live like you are not - how quick to ER depends a lot on the ratio of income to expenses.

 

[nearly50]

The numbers I posted do not include non-financial assets, such as vehicles, equity in primary residence, non-residential property, etc., only assets such as CDs, mutual funds, stocks, bonds, life insurance and cash accounts. I couldn't tell if they had taken consumer debt into account.

The data comes from the triennial Survey of Consumer Finances that is sponsored by the Fed and conducted by the University of Chicago. How realistic the numbers seem to you depends on how much you trust surveys (remember the exit polls on Nov 2?)

 

[ER@50]

The numbers I posted do not include non-financial assets, such as vehicles, equity in primary residence, non-residential property, etc., only assets such as CDs, mutual funds, stocks, bonds, life insurance and cash accounts.  I couldn't tell if they had taken consumer debt into account.

The data comes from the triennial Survey of Consumer Finances that is sponsored by the Fed and conducted by the University of Chicago.  How realistic the numbers seem to you depends on how much you trust surveys (remember the exit polls on Nov 2?)

Knew those numbers were LOW! Net Worth is Net Worth. Principal Residence, Cash, Investments, Stocks, etc, etc.....

 

[haha]

I am 32 and hubby turned 35 last month.  Our net worth is $800,000.

Congratulations C-Girl!. I think your accomplishment is astounding. At 32 many people still don't know what they want to be when (if?) they grow up.

Mikey

 

[haha]

What is a reasonable net worth for one's age?

This question is interesting in an idle water-cooler converstaion way. But you don't live on net worth- you live on income and the security of that income. As someone pointed out on another thread, plenty of people with $2m net worth have to live more carefully than a couple with two generous and secure pensions and subsidized healthcare.

That couple could have a very low net worth,and still live great and sleep well.

There is nothing like a government pension with a shot of COLA!

In fact, I sure wish I had figured that out earlier in life.

Mikey

 

[unclemick]

Don't government pensions come from the same place as SS - the taxpayer.

Exceptions - ??teachers and certain 'funded' pensions locally??

Curious whether some are considered - er ah - more better than others.

 

[Calgary_Girl]

Congratulations C-Girl!. I think  your accomplishment is astounding. At 32 many people still don't know what they want to be when (if?) they grow up.

Mikey

Thanks Mikey!

Yeah, I've always been the level-headed kid in the family Hubby and I definitely live within our means.

 

[JonnyM]

Don't government pensions come from the same place as SS - the taxpayer.

Exceptions - ??teachers and certain 'funded' pensions locally??

Curious whether some are considered - er ah - more better than others.

Most come from somewhere "else", i.e. NOT the federal government. and they are funded by a combination of employee and employer contributions.

And YES, they very greatly, I've been investigating that very subject as it is very dear to my heart, and have already found differences of 500 percent in the benefits between different government entities in different parts of the country (for a given salary level).

Some are very much more better than others.

 

[Sparky]

ER at age 44, 45 in 2003.

$1.3million assets.

$300K house
$1M liquid.

 

[BilltSuperTester]

My wife and I are 43 and our net worth is about 910K not counting our home equity. C-girl - you are amazing. Our networth was about 60K when we were your age . We have been saving our tails off since then to make up for our lack of discipline in our younger years.

 

[Calgary_Girl]

My wife and I are 43 and our net worth is about 910K not counting our home equity.  C-girl - you are amazing.  Our networth was about 60K when we were your age   .  We have been saving our tails off since then to make up for our lack of discipline in our younger years.

You're pretty amazing yourself! To go from $60K to $910K in only 11 years? Wow

 

[R.H.]

I've found "net worth" to be a somewhat meaningless statistic because there does not seem to be any standardized methodology for calculating it. For example, many include in their "assets" tax-deferred investments at their value before adjusting for taxes. In my opinion, this over-inflates one's real net worth. Others include every item of personal property, including the clothes on their back -- even though much of it has no real marketable value. I wish there was a standard methodology so that we could avoid comparing "apples and oranges."

 

[Bob_Smith]

For example, many include in their "assets" tax-deferred investments at their value before adjusting for taxes.  In my opinion, this over-inflates one's real net worth.

I don't think I agree with this. I'd rather have tax-deferred accounts. If I'm 10-20 years from needing to access any of those funds, those assets can compound without the drag of taxes during all of those years. Furthermore, if I pull the funds out gradually, much will be left to compound for many more years. I'm guessing that when it all shakes out, my tax deferred money is probably worth more, all things considered.

Others include every item of personal property, including the clothes on their back -- even though much of it has no real marketable value.

I agree. I don't "count" any of that stuff - just my house.

 

[retire@40]

I've found "net worth" to be a somewhat meaningless statistic because there does not seem to be any standardized methodology for calculating it.  For example, many include in their "assets" tax-deferred investments at their value before adjusting for taxes.  In my opinion, this over-inflates one's real net worth.  Others include every item of personal property, including the clothes on their back -- even though much of it has no real marketable value.  I wish there was a standard methodology so that we could avoid comparing "apples and oranges."

There is a standard methodology. Net Worth = Total Assets - Total Liabilities

Of course you have to include your tax-deferred investments in this calculation in the assets part of the formula. The mistake everyone makes is that they do not include the "deferred taxes payable" in the liability part of the formula. Why? Because it's too hard to figure out for most people and it may not be the tax you would end up paying anyway when you do retire.

Deferred taxes is an important calculation that should be done at least once before retirement to minimize your taxes on withdrawals from your investments. For example, it would make no sense to cash out a taxable IRA this year and put yourself in the 15% tax bracket when with proper planning you could have cashed out half of that IRA and half of a Roth IRA and pay no taxes.