Calculating net worth isn’t just for the wealthy. Understanding what your net worth is by age will help you plan your financial future. It can act as a compass and determine whether you are on the right track toward meeting your personal fiscal goals.
Ideally, your net worth should grow over time. If it starts to decline, it’s a signal that it’s time to start saving more and spending less. Experts recommend watching your financial progress as you age. Start by calculating your net worth now and then circle back once or twice a year.
Even before you determine your net worth, it’s important to first understand what the term means. The total of what you own (your assets) minus what you owe (liabilities) makes up your net worth, from the house you own and the cash you have in the bank to the money you owe on a car.
Determining your net worth is important because it gives you a look into your current financial situation in real-time and acts as a strong indicator of your overall fiscal health. As stated earlier, your net worth should grow as you age. Here are some checkpoints to see what your net worth should be by age:
- Your 20s: Save Early and Often
- Your 30s: Pay Yourself First
- Your 40s: Can’t Stop, Won’t Stop Saving
- Your 50s: Reaching Your Earnings Peak
- Your 60s: Retirement Is Right Around the Corner
- Don’t Put Off Saving Until Tomorrow, Start Today
Your 20s: Save Early and Often
You probably just started your career in your 20s and likely have some student loan debt, so it might be difficult to think about how to build your net worth. The reality is that the financial decisions you make during this decade can lay the foundation for your entire financial life. According to The Federal Reserve’s Survey of Consumer Finances, the average net worth for families whose head of the household is 35 and under is $76,200.
The good news is that it’s not impossible to create a solid net worth even during your younger years. For one thing, your current income level will likely go up as you age. Many first careers usually come with other advantages to help you grow wealth, including a 401(k) plan that might include an employer match. Making the most of these advantages can push your net worth in a positive direction.
If you can get a solid footing with your net worth in your 20s — meaning your total assets and savings exceed the money you owe on loans and other liabilities — you’ll be well on your way to getting your financial house in order.
Learn More: How To Calculate Your Net Worth
Your 30s: Pay Yourself First
As you head into your 30s, it’s advisable to kick your savings into a higher gear. This should be your extreme growth phase. In a perfect world, your student loans are disappearing, your salary is increasing and other debts are being paid off accordingly. The average net worth for families with heads of household ages 35 to 44 jumped way up to $288,700, according to The Federal Reserve’s Survey of Consumer Finances.
Ultimately, your goal at this point in your life is to have half of your salary saved by age 30, with a stair-step increase every year after. If you’re making $60,000 in your 20s, for example, strive for $30,000 in savings by age 30. You can achieve this by establishing a budget and sticking to it, starting to invest and contributing regularly to your 401(k). If your ultimate goal is to be considered wealthy, keep in mind that you would need a net worth of $2.3 million to qualify, according to a survey by Charles Schwab.
Find Out: How Much Money Do I Need To Retire?
Your 40s: Can’t Stop, Won’t Stop Saving
Now that saving is ingrained into your financial plan, the key is to continue on that path forward. By age 40, your goal is to have a net worth of two times your annual salary. The Federal Reserve’s Survey of Consumer Finances reports an average net worth of $727,500 for families with heads of household in the age range of 45 to 54. If your salary goes up to $85,000 in your 30s, then by age 40 you should aim for savings of $170,000. Because retirement is starting to get closer, your 40s should be a time to focus on your earning power and making as much money as you can.
As you continue to build your net worth, you will also be establishing where you are in terms of income class. As a reference point, according to a 2018 piece from Pew Research Center, the median income for the upper-income class was $187,872. This can also provide a guide as to where your net worth stands overall.
Your 50s: Reaching Your Earnings Peak
Your 50s allow you to reach the top of your savings mountain. The average net worth for families with heads of household between the ages of 55 and 64 was reported to be $1.167 million, according to The Federal Reserve’s Survey of Consumer Finances. Theoretically, these should be your highest-earning years, so you should be at peak savings power. By this time, the kids are probably on their own, your mortgage is paid off and, according to Fidelity, your savings should be six times your salary. That means if you’re making $100,000 in your 40s, you should have a target net worth of $600,000 beginning at age 50.
JPMorgan Chase suggests that several retirement checkpoints should determine your savings. It recommends that if you make $300,000 a year at 55, you should have 9.2 times that in savings, or $2.76 million.
More Here: Your Best Age To Retire
Your 60s: Retirement Is Right Around the Corner
Because retirement is on the horizon, your 60s will determine your lifestyle for the rest of your life. What you do here can make all the difference in what you decide to do post-career. The Federal Reserve’s Survey of Consumer Finances reports that the average net worth for families with heads of households ages 65 to 74 is $1.066 million.
Fidelity suggests that at 60, you’ll want eight times your current salary saved, and by 67 (retirement age), you’ll want 10 times your salary saved. As a reference point, the Government Accountability Office (GAO) found that the median retirement savings for Americans between ages 55 and 64 was $104,000.
Learn More: Best 401(k) Companies
Don’t Put Off Saving Until Tomorrow, Start Today
The reality is that it’s never too late to get your financial cards in order. Don’t be discouraged if your net worth doesn’t look like what’s outlined here. Many variables contribute to calculating your net worth by age, but the key thing to remember is that you shouldn’t delay what you can do today to improve your financial health.
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This article has been updated with additional reporting since its original publication.
Figures from the Federal Reserve survey are from 2016 and reflect families rather than individuals.