Pop quiz!
What is your net worth?
Kudos to you if you can answer that question quickly and relatively accurately.
Knowing your net worth indicates you are likely making intentional choices with your money. You likely are more concerned with how much money you keep, not how much you make.
It also likely means that you have a plan and are well on your way to financial independence.
Well done!
If you know your net worth, you might be wondering how you measure up to people your age.
That’s what we’re going to look at today.
First, let’s discuss why it’s important for all of us to track our net worth.
Why is it important to track your net worth?
By tracking your net worth, you can quickly see if you are making good money decisions or need to make adjustments.
I recommend everybody, no matter where you are in your financial journey, track your net worth.
By the way, tracking your net worth is not a major time commitment.
It takes me less than 30 minutes each month to track and discuss what I consider to be one of the most important metrics in personal finance.
That’s all the time it takes to know if I am progressing towards my most important financial goals.
If you don’t know your net worth, now is the time to start tracking it.
For a step-by-step guide to tracking your net worth, check out my post here:
Just like budgeting with two simple numbers, tracking your net worth is the best, and easiest, way to measure your money progress.
There’s no better way to learn how much money you’re keeping after a month of making money.
Think of tracking your net worth in terms of keeping score during a basketball game.
If you don’t know the score of the game, you don’t know if your strategy is working. You don’t know if you need to make adjustments before time runs out.
The same applies to tracking your next worth. The point is to educate yourself on your current financial situation so you can make adjustments while there is still time.
How do I know if I need to make adjustments based on my net worth?
Speaking of making adjustments, it can sometimes be helpful to look at datasets to see how you measure up to the rest of the population.
So today, we’ll look at two potentially helpfully net worth metrics.
First, we’ll look at the average net worth of Americans by age.
Then, we’ll look at the average net worth by age of the Top 1%.
The goal is to give you some benchmarks so you can assess where you’re currently at. Then, you can decide if you want to make any adjustments.
In other words, the point is to educate yourself so you can make intentional choices for your own situation. The point is not to start comparing yourself to your neighbors.
OK, let’s get to it.
What is the net worth of Americans by age?
Below is the average and median net worth of Americans by age based on research from Empower.
Keep in mind these studies are not perfect.
It’s not an easy task to track and study net worth across a wide population. Not everyone tracks her net worth, let alone makes it easy for outsiders to track it.
Use these figures as a rough guide to help your own decision-making. Just don’t get too caught up in the exact figures.
Net Worth by Age
Age | Average Net Worth | Median Net Worth |
|---|---|---|
| 20s | $121,004 | $6,609 |
| 30s | $307,343 | $24,247 |
| 40s | $743,456 | $75,719 |
| 50s | $1,330,746 | $191,857 |
| 60s | $1,547,378 | $290,447 |
| 70s | $1,444,413 | $233,085 |
| 80s | $1,342,656 | $233,436 |
| 90s | $1,212,583 | $205,043 |
High school math refresher: The average is calculated by adding up all values in a dataset and dividing by the count. The median is the middle value of a dataset with an equal number of values above and below. Averages can be skewed by extreme values, so the median can give you a more accurate picture.
Here are some observations about the average net worth of American by age:
- Net worth tends to increase with age. No surprise there, right? As our careers progress, we tend to earn more and invest more money.
- Net worth tends to peak in our 60s. This also makes sense. When people reach retirement age, they start to draw down their portfolio. They’ve spent decades accumulating wealth and eventually it’s time to spend that savings.
- Notice the effects of compound interest. From the 20s to the 30s, we see that the median net worth nearly quadruples. That’s a 400% increase! However, it equates to a median net worth increase of only $18,000.
- Compare that to the change from the 50s to 60s. We see that the median net worth increases by only 50%, but the result is an increase in nearly $100,000.
- The takeaway is that when you have more money invested, smaller gains result in higher earnings. You could say, “the rich get richer.”
What is the net worth by age of the top 1%?
Next, let’s take a look at the average net worth by age of the Top 1%, thanks to an analysis of Federal Reserve data by DQYDJ.
Remember, these are only rough figures. Use this data to help you strategize based on your current financial situation.
Net Worth by Age of the Top 1%
| Age | Top 1% Net Worth |
|---|---|
| 18-24 | $653,224 |
| 25-29 | $2,121,910 |
| 30-34 | $2,636,882 |
| 35-39 | $4,741,320 |
| 40-44 | $7,835,420 |
| 45-49 | $8,701,500 |
| 50-54 | $13,231,940 |
| 55-59 | $15,371,684 |
| 60-64 | $17,869,960 |
| 65-69 | $22,102,660 |
| 70-74 | $18,761,580 |
| 75-79 | $19,868,894 |
| 80+ | $16,229,800 |
Are these dollar amounts lower or higher than you expected?
If these dollar amounts seem unattainable, remember that 99% of us will never hit these marks. Don’t get discouraged. You’re doing great work if you’re anywhere close to these numbers.
Did you notice that the trends in the Top 1% net worth data are very similar to the average net worth by age data we previously looked at?
We again see the net worth of the Top 1% peaking in the 60s.
We also see the same effects of compound interest.
This data reinforces the point that investing favors people who start early, even if the results do not materialize for decades. It takes time for compound interest to work its magic.
Tracking your net worth is the best way to measure your personal financial progress.
By now, you should have an idea of where you stand compared to the rest of the population.
What can you do with this information?
If you’re happy with how you measure up, that might mean you’ve reached a level of financial independence where you have options in life.
Having options in life means that you’ve achieved the ultimate goal: FIPE (Financial Independence, Pivot Early).
When you reach FIPE, you are free to pivot to a new challenge, if that’s what you want.
On the other hand, maybe you looked at this data and learned that you are not as far along on your financial journey as you had hoped.
Don’t panic.
The benefit is that you can now make adjustments.
What kind of adjustments can you make after learning your net worth?
When you track and study your net worth, you can make adjustments while you still have time on your side.
For example, you may decide that it’s finally time to boost your saving rate.
After all, your saving rate is the one thing you can actually control on your way to financial independence.
Or, you might take a fresh look at your Budget After Thinking to find ways to generate more fuel for your investments.
And, it might mean saving and investing that one-time windfall instead of spending it on stuff you don’t really care about.
Whatever decisions you make, knowing the average net worth by age can help point you in the right direction.
It takes me less than 30 minutes per month to track my net worth.
It takes me less than 30 minutes each month to track and study one of the most important numbers in personal finance.
Each month, I’m only looking for progress compared to what my net worth was previously.
If my net worth increases over time, it means I am heading in the right direction.
It means that I am continuing to fuel my Later Money goals. I am paying down debt. I’m letting my investments do their thing.
If my net worth is not increasing, it means I need to figure out why and consider making adjustments.
Sometimes my net worth decreases because the markets are heading down. If that’s the case, I don’t do anything. At this stage in my life, I can afford to wait while markets tick back up.
If the issue is that my debt is increasing, or I didn’t fuel my investments that month, I know I need to make adjustments.
By studying my net worth each month, I can catch these setbacks before they become a continuous problem.
Do you track your net worth?
Are you happy with how you measure up?
If not, are you prepared to make the necessary adjustments?
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