Introduction
Ever wondered how your financial status measures up against others? In our financial journey, it’s natural to ask if we’re on the right path. Today, we’ll unveil the average, median, and top 1% of net worth across different age groups.
The Foundations of Net Worth
Before we dive into the comparisons, it’s crucial to understand what net worth actually is. It’s a simple term, but it carries substantial weight in our financial lives. Your net worth is like a financial scorecard.
It gives you a snapshot of your financial health at any given moment. So how do we calculate net worth? It’s straightforward.
Assets can include things like your savings, investments, and property. Liabilities, on the other hand, could be loans or credit card debts. A positive net worth means your assets are greater than your liabilities.
That’s a sign you’re doing well financially. It means you’ve got more wealth than debt. On the flip side, a negative net worth, where your liabilities exceed your assets, may signal that it’s time to rethink your financial habits.
Now that we’re clear on what net worth is and why it matters, we’re ready to embark on our journey of comparisons. Starting in your 20s and moving right through to your 60s and beyond, we’re going to examine the average, median, and top 1% of net worth for each age group.
The 20s:Laying the Groundwork
THE 20S: LAYING THE GROUNDWORK Starting your career, maybe paying off student loans, or even starting to save for your first house. It’s been a decade of growth, exploration, and, more often than not, some financial uncertainty.
When it comes to net worth, those in their 20s are typically at the start of their wealth-building journey. The average net worth in your early 20s is just shy of $30,000. But what does this number mean?
Well, remember that the average is heavily influenced by outliers on the high end. Some 20-somethings might have a negative net worth due to student loan debt, while others may have received inheritances or started successful businesses, leading to an unusually high net worth.
This average number is, therefore, not an accurate indicator of where the average person is. However, the median net worth in this age range, which isn’t as skewed by high earners, is around $8000.
The median net worth gives us a middle-of-the-pack view, showing what someone right in the middle of all early 20-year-olds might have saved. And what about the top 1%?
These high achievers, or lucky recipients, through a combination of high-earning jobs, wise investments, or family wealth, already have a net worth of about $400,000.
Sounds like a lot, right? But remember, they’re the exception, not the rule. In your late 20s, the median net worth stays the same at around $8000, while the average net worth jumps to about $50,000, and the top 1% has around $600,000. Don’t feel disheartened if your net worth is not quite there yet.
The 20s are a time of financial discovery and learning. It’s about laying the groundwork for your future. It’s time to focus on increasing income, setting savings goals, and starting to invest.
The most important thing to do in your 20s is to save as much of your income as possible, get rid of high-interest debt like credit card debt, and invest that money for the long run in proven compounding assets like the S&P 500 index or real estate.
By the way, if you want to dive deeper into the world of finance and learn more about the power of compounding, check out ‘The Psychology of Money’ by Morgan Housel, a game-changing book that’s transformed how I see money.
The 30s: Taking Strides and Building Wealth
As we turn the page and move into the 30s, THE 30S: TAKING STRIDES AND BUILDING WEALTH, things start to get a bit more interesting. Now, let’s talk numbers.
This reflects the fact that many people in this age group have started to make headway on their debts and are growing their assets.
This higher figure is influenced by those on the higher end of the wealth scale. The early 30s are often a time of rapid career progression, which can lead to increased earnings and, consequently, a higher net worth for some.
As we move into our late 30s, we start to see sharp rises in net worth as people start to reach the upper echelon of their field and start to exit or cash in on companies they might have started in their 20s.
The median net worth is about $55,000, while the average is about $275,000. While people’s net worth begins to skyrocket during this time, it’s also a time when people’s expenditures begin to rise dramatically due to things like mortgages, having children, and developing pricier hobbies.
The top 1% of this age group has a net worth of around $4 million. Think of this tiny sliver of high earners as a mix of people who have found their way to the C suite earlier in life, high performers in certain industries, trust fund babies, and also those who have found success in their small businesses by their late 30s.
It’s important to remember that your 30s are a time for building and growing. This is the stage of life where you’re likely to see significant growth in your net worth. You’re more settled in your career, likely earning more, and if you’ve been diligent, you’ve probably continued to invest too.
This is a time when people continue to build their expertise in their field so that they can provide the most value to others and thereby earn higher incomes. If you find yourself behind the median at this point, try to really build up that expertise instead of chasing get-rich-quick schemes.
The 40s: Stepping Up the Wealth Game
This is the decade where many people hit their stride in terms of financial stability. So, what does the financial landscape look like for those in their 40s? Well, the median net worth for this age group is about $160,000.
As for the average net worth, it shoots up to around $750,000 in the 40s.
This increase is driven by high-earners who have managed to substantially grow their wealth. It’s interesting to note the leap from the 30s to the 40s, showing how consistent saving, investing, and wise financial management can significantly bolster net worth over time.
Remember, in America, nearly 80% of millionaires are self-made, meaning discipline and dedication over time can get you there. But the numbers that truly stand out in the 40s belong to the top 1%.
Those in this elite bracket have a net worth of around $10 million. They are the ones who’ve made it big in their careers, businesses, or investments—think successful business owners or partners at legal, financial, or consulting firms.
They represent a tiny fraction of the population. The most important takeaway from the 40s is the noticeable growth in net worth. It’s the period where the seeds planted in the 20s and 30s start to bear fruit.
They call the 40s the peak earning years because you’ve built up enough experience to really cash in on your career, and you also have enough energy to do so! In your 40s, it is important to start building real equity in various areas of your life.
If you find yourself falling behind, try to save up enough to buy a house so that you are forced to build equity through mortgage payments, and make sure to max out your Roth or conventional IRA account, review your insurance policies, and consider a college savings plan if you have kids to set yourself up for retirement.
The 50s: Reaping the Benefits
And now, we reach the 50s and beyond. THE 50S: REAPING THE BENEFITS Let’s dive straight into the numbers. The median net worth for those in their 50s is approximately $170,000.
This reflects the steady climb we’ve been seeing in net worth as we move through the age groups.
The average net worth in the 50s shoots up to over $1.1 million. This figure represents a broad spectrum of individuals, from high-income earners to those who’ve been steadily saving and investing throughout their working years.
Now, get ready for the grand reveal of the top 1% in this age bracket. Their net worth is an incredible $17 million. This might seem like a number straight out of a dream, but it represents the upper echelon of wealth, a group that has managed to amass significant fortunes through various means, typically through ownership of equity and assets.
But let’s put these numbers in perspective. If you’re in your 50s and your net worth isn’t in the millions, it’s not cause for alarm. Maximize your retirement savings, including the allowed ‘catch-up’ contributions.
Reduce your debt and revise your investments to be more conservative. Plan for healthcare costs and potential retirement living expenses. Keep your estate plans up-to-date and strategize the best time to claim Social Security benefits.
Lastly, maintain an emergency fund and prioritize your health. Remember, your financial journey is personal to you. The important part is making consistent progress and making sure you’re setting yourself up for a comfortable and secure future.
Remember, money is simply a tool rather than a goal in life. If you want to use money to gain freedom, here’s a simple rule: Take your annual expenses and multiply them by 25. This should be the net worth number you are aiming for.
The 60s and Beyond: The Golden Age
The Golden Age period of life is when many people are moving towards retirement or are already retired. Let’s look at the numbers. The median net worth for individuals in their 60s is around $270,000.
This continues the trend we’ve seen of growing net worth as we progress through the age groups. The average net worth at this age is approximately $1.3 million, showing the growth in wealth over the years through diligent saving and investing.
Now, onto the top 1%. This elite group has a staggering net worth of around $16 million. These are the people who’ve experienced exceptional financial success in their lifetimes, often due to significant business ownership or highly successful careers.
Again, these numbers are not a benchmark that everyone should aim to achieve. They’re simply indicative of how net worth can vary vastly within a population. Your journey is unique, and your financial goals should align with your personal ambitions and lifestyle.
$16 million is above and beyond what most people need to live a very comfortable life. In your 60s, the focus typically shifts towards preserving wealth and creating a sustainable income stream for retirement.
You may also be considering estate planning and, potentially, how to leave a financial legacy to your children or grandchildren. Even if you are behind the median net worth at this age, don’t be discouraged.
Many people continue to work, save, and invest well into their 70s, and every dollar saved counts. Focus on controlling expenses and maintaining a lifestyle that is sustainable in the long run.
The Takeaways: Mapping Out Your Financial Journey
Now that we’ve traveled through the financial landscapes of different decades, it’s time to sit back and soak in the insights. Each age group has its own financial story to tell, but what ties them all together is the ongoing journey to grow wealth and secure a comfortable financial future.
One of the main insights from this journey is the importance of starting early. The sooner you start saving and investing, the more time your money has to grow.
Compounding, where your money earns interest and then that interest earns interest, is a powerful tool that can greatly magnify your wealth over time. Remember, everyone’s financial journey is unique.