The Average Net Worth For The Above Average Married Couple
One of the most popular posts on Financial Samurai with over 250 comments is The Average Net Worth For The Above Average Person. The “above average person” is loosely defined as someone who graduated from college (35% of the American population), works hard, plays well with others, takes full advantage of their pre-tax retirement plans, saves additional disposable income, stays on top of their finances, expects nothing from their parents or the government and is not delusional. If you were a “C student” and expect to live an “A lifestyle,” you are definitely not the above average person!
Take a moment to study the above average person’s net worth chart again. Somewhere between the ages of 45-50, the above average person’s net worth reaches over one million dollars. We can all agree that thanks to inflation, easy monetary policy, a roaring bull market and a recovery in real estate, becoming a millionaire by the time we retire is fast becoming the rule, rather than the exception.
| THE AVG NET WORTH OF THE ABOVE AVERAGE PERSON | |||||
| Age | Yrs Worked | Avg Pre-Tax Savings | Avg Post-Tax Savings | Avg Property Equity | Total Net Worth |
| 22 | 0 | $ - | $ - | $ - | $ - |
| 23 | 1 | $ 12,500 | $ 7,500 | $ - | $ 20,000 |
| 24 | 2 | $ 35,000 | $ 15,000 | $ - | $ 50,000 |
| 25 | 3 | $ 56,000 | $ 25,000 | $ - | $ 81,000 |
| 30 | 8 | $ 154,500 | $ 67,500 | $ 17,500 | $ 239,500 |
| 35 | 13 | $ 273,000 | $ 115,000 | $ 30,000 | $ 418,000 |
| 40 | 18 | $ 410,500 | $ 162,500 | $ 70,000 | $ 643,000 |
| 45 | 23 | $ 573,500 | $ 200,000 | $ 117,500 | $ 891,000 |
| 50 | 28 | $ 771,500 | $ 237,500 | $ 162,500 | $ 1,171,500 |
| 55 | 33 | $ 1,011,500 | $ 275,000 | $ 225,000 | $ 1,511,500 |
| 60 | 38 | $ 1,306,000 | $ 312,500 | $ 290,000 | $ 1,908,500 |
| 65 | 43 | $ 1,670,500 | $ 375,000 | $ 375,000 | $ 2,420,500 |
| Source: FinancialSamurai.com | |||||
It’s important to note the figures in my chart are for individuals and not for couples. For those of you who combined your household net worth to see where you stand, so sorry. That’s cheating. At the same time, not everybody can find someone they love hence why I initially created a per person chart. It would be presumptuous to assume we can all live in marital bliss. Not everybody is even allowed to get married thanks to the government telling us who we can and cannot be with. For simplicity’s sake, I will refer to “married couples” as anybody who is in a long term relationship.
This article will come up with reasonable “above average couple net worth” charts based on what I think, what the government thinks, what you think, and the realities of life. One can also define “above average” as one standard deviation beyond the midpoint of the normal distribution curve (top 16%). Not every couple can be above average. But every couple can certainly try.
THE AVERAGE NET WORTH OF THE ABOVE AVERAGE COUPLE
Everybody knows that married couples who stay together have a financial advantage over single people. Couples can split a $2,500 a month two bedroom apartment two ways instead of paying a full $2,000 a month for a one bedroom as an individual. It’s much more efficient and cheaper to cook for two. Meanwhile, there are probably plenty of buy one get one free specials too. The economies of scale are everywhere for couples.
Before we go about the exercise of figuring out the net worth of the above average couple, let’s take a moment to define an above average couple.
* Stays together for the long term.
* Discusses long term financial goals e.g. retirement age.
* Does not keep financial secrets.
* Knows their monthly budget like the back of their hand.
* Makes sure their net worth risk exposure is aligned with their goals.
* Shares expenses in a fair way.
* Supports each other’s careers and endeavors.
* Works together as a team to get things done.
* Seeks to understand the other side of a story during conflicts and come to a middle ground.
* Plans for the financial expense of children even if they don’t or can’t have any.
* Each spouse can financially support themselves if the relationship ends.
METHODS FOR CALCULATING NET WORTHS OF COUPLES
The Equality Method
The equality method basically states that a man and a woman are equal. Given both sexes are equal, it is only logical to conclude that both spouses study hard in school, work, save, and invest for the future before and after meeting each other. One simply has to double the amounts in my above average person net worth chart to get to the Equality Net Worth chart.
| AVERAGE NET WORTH OF THE ABOVE COUPLE – EQUALITY | |||||
| Age | Yrs Worked | Avg Pre-Tax Savings | Avg Post-Tax Savings | Avg Property Equity | Total Net Worth |
| 22 | 0 | $ - | $ - | $ - | $ - |
| 23 | 1 | $ 25,000 | $ 15,000 | $ - | $ 40,000 |
| 24 | 2 | $ 70,000 | $ 30,000 | $ - | $ 100,000 |
| 25 | 3 | $ 112,000 | $ 50,000 | $ - | $ 162,000 |
| 30 | 8 | $ 309,000 | $ 135,000 | $ 35,000 | $ 479,000 |
| 35 | 13 | $ 546,000 | $ 230,000 | $ 60,000 | $ 836,000 |
| 40 | 18 | $ 821,000 | $ 325,000 | $ 140,000 | $ 1,286,000 |
| 45 | 23 | $ 1,147,000 | $ 400,000 | $ 235,000 | $ 1,782,000 |
| 50 | 28 | $ 1,543,000 | $ 475,000 | $ 325,000 | $ 2,343,000 |
| 55 | 33 | $ 2,023,000 | $ 550,000 | $ 450,000 | $ 3,023,000 |
| 60 | 38 | $ 2,612,000 | $ 625,000 | $ 580,000 | $ 3,817,000 |
| 65 | 43 | $ 3,341,000 | $ 750,000 | $ 750,000 | $ 4,841,000 |
| Source: FinancialSamurai.com | |||||
Some of you argue that men and women are not equal and will therefore disagree with how high the figures are in the Equality Net Worth chart. I’m not sure which century or country you are living in, but males and females are equal here in America at least. If they are not equal in your country please share in the comments section why.
Meanwhile, some of you will argue that the figures are too low because there are tremendous financial synergies in a relationship. Since you can’t have synergies before you actually meet, it’s better to simply double the above average net worth per person figures to stay conservative. Independence is a core part of Americana, except for grown adults who still live with their parents.
Discrimination and sexism is wrong therefore I am a strong proponent of the Equality Net Worth method.
The Government Taxation Method
The government taxation method incorporates their latest desire to raise federal income taxes on individuals making over $400,000 a year and married couples making over $450,000 a year. The government is sexist and believes one spouse should drop his/her $400,000 income and be a stay at home spouse or make no more than $50,000 a year as soon as the couple settles down.
Given the government is predominantly made up of men, one can assume the government is showing sexism towards women. The inference is that women cannot have a lucrative career and be a mother at the same time. Clearly the government has never met Sheryl Sandberg of Facebook or Marissa Mayer of Yahoo. No work from home for you!
A combined income of $450,000 provides only a 12.5% greater threshold than $400,000 for an individual. To get to the Government Taxation Net Worth chart below, we will increase the above average person’s net worth by 12.5% to comply with the government’s view on married people.
| AVERAGE NET WORTH OF THE ABOVE AVERAGE COUPLE – GOVERNMENT | |||||
| Age | Yrs Worked | Avg Pre-Tax Savings | Avg Post-Tax Savings | Avg Property Equity | Total Net Worth |
| 22 | 0 | $ - | $ - | $ - | $ - |
| 23 | 1 | $ 14,063 | $ 8,438 | $ - | $ 22,500 |
| 24 | 2 | $ 39,375 | $ 16,875 | $ - | $ 56,250 |
| 25 | 3 | $ 63,000 | $ 28,125 | $ - | $ 91,125 |
| 30 | 8 | $ 173,813 | $ 75,938 | $ 19,688 | $ 269,438 |
| 35 | 13 | $ 307,125 | $ 129,375 | $ 33,750 | $ 470,250 |
| 40 | 18 | $ 461,813 | $ 182,813 | $ 78,750 | $ 723,375 |
| 45 | 23 | $ 645,188 | $ 225,000 | $ 132,188 | $ 1,002,375 |
| 50 | 28 | $ 867,938 | $ 267,188 | $ 182,813 | $ 1,317,938 |
| 55 | 33 | $ 1,137,938 | $ 309,375 | $ 253,125 | $ 1,700,438 |
| 60 | 38 | $ 1,469,250 | $ 351,563 | $ 326,250 | $ 2,147,063 |
| 65 | 43 | $ 1,879,313 | $ 421,875 | $ 421,875 | $ 2,723,063 |
| Source: FinancialSamurai.com | |||||
If you love the government, are very traditional, and believe one spouse should probably stay at home then you are a proponent of the Government Taxation Net Worth method. Put it differently, you believe the wife is worth just 12.5% the value of the husband. By taking 75% off the value of one spouse, we account for a couple kids and a non working spouse before age 40. Again, we are regressing back to the days of Dowton Abbey when women couldn’t even vote to keep their inheritances.
The Financial Samurai Method
By now I’m sure I’ve upset many couples with my various conjectures about the Equality method and the Government Taxation method of figuring out the net worth for above average couples. What you are really upset about is the revelation of your own beliefs. It’s wrong to say one thing and do another e.g. voting to raise taxes on one group without having to pay more yourelf. Not to worry! Have some milk and cookies as I promise not to aggravate your nerves further.
The Financial Samurai Net Worth method provides a recognition there are financial synergies for being a couple. At the same time, the Financial Samurai method denounces government policies to its core for its sexist and discriminatory ways. Besides the ludicrous 12.5% increased allowance for married couples, the government only provides child tax credits, student interest deductions, and IRA contributions to those who make below a certain amount. It’s shameful to discriminate against hard working Americans who live in higher cost of living areas. The government should treat everyone equally and not pick and choose who gets to thrive and who gets to suffer.
I am a strong believer that each spouse should save and invest as an independent man or woman. Breakups happen all the time so it is imperative we count on nobody, not even the present love of our lives for financial survival. At the same time, there is no need to have double the property size presumably because a couple is sharing a room, a kitchen, a bathroom, a living room, a dining room, a garage, and a backyard. Let’s have a look at the chart.
| AVERAGE NET WORTH OF THE ABOVE AVERAGE COUPLE – FS | |||||
| Age | Yrs Worked | Avg Pre-Tax Savings | Avg Post-Tax Savings | Avg Property Equity | Total Net Worth |
| 22 | 0 | $ - | $ - | $ - | $ - |
| 23 | 1 | $ 25,000 | $ 15,000 | $ - | $ 40,000 |
| 24 | 2 | $ 70,000 | $ 30,000 | $ - | $ 100,000 |
| 25 | 3 | $ 112,000 | $ 50,000 | $ - | $ 162,000 |
| 30 | 8 | $ 309,000 | $ 135,000 | $ 26,250 | $ 470,250 |
| 35 | 13 | $ 546,000 | $ 230,000 | $ 45,000 | $ 821,000 |
| 40 | 18 | $ 821,000 | $ 325,000 | $ 105,000 | $ 1,251,000 |
| 45 | 23 | $ 1,026,250 | $ 406,250 | $ 176,250 | $ 1,608,750 |
| 50 | 28 | $ 1,282,813 | $ 507,813 | $ 243,750 | $ 2,034,375 |
| 55 | 33 | $ 1,603,516 | $ 634,766 | $ 337,500 | $ 2,575,781 |
| 60 | 38 | $ 2,004,395 | $ 793,457 | $ 435,000 | $ 3,232,852 |
| 65 | 43 | $ 2,505,493 | $ 991,821 | $ 562,500 | $ 4,059,814 |
| Source: FinancialSamurai.com | |||||
Assumptions
* The average pre-tax savings (401k/IRA) and post-tax savings amounts double every year until age 40 and then only increase by 25% every five years after.
* After age 40, the savings rates increase by only 25% a year to account for early retirement of one spouse, if not both spouses.
* The average property equity increases by 50% every five years instead of 100% given you don’t need double the space to live together.
* The cost of kids is accounted for by the decrease in the increase of pre-tax savings, post-tax savings, and property equity increases.
* The above average married couple are millionaires before they reach 40 years old. They develop the optionality for one spouse to retire or find a different career that may not pay as much if so desired.
* By age 50 chances are high both spouses can retire provided they have sufficient passive income streams to cover all expenses.
CONCLUSION
The above average couple is based upon my assumptions of the above average person. Hence, please have a read of the article if you want to get more details about how I came up with my original net worth chart. Divorce is probably the most destructive act for an individual’s finances, but that is a topic for another day.
Not only do couples have roughly a 70% higher combined net worth than single folks, life is also more enjoyable when spent with someone you love. Just make sure to keep track of your finances and have open dialogues throughout the years. I hope everybody has found this exercise useful. Please share with me whether you agree or disagree with my charts and why. If you haven’t found that special someone yet, what are you waiting for?
Recommendation For Building A Couple’s Net Worth
The best thing couples can do to grow their combined net worth is stay on top of their finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts in one place so you can see where to optimize. Before Personal Capital, I had to log into eight different systems to track 28 different accounts (brokerage, multiple banks, 401K, etc) to track my finances. Now I can just log into Personal Capital to see how my stock accounts are doing, how my net worth is progressing, and where my spending is going. Their 401K Fee Analyzer tool is saving me over $1,700 a year in fees I had no idea I was paying.
I’ve personally met up with four Personal Capital managers as they are also based here in San Francisco. I believe in their company and they are continuously rolling out new free products for their customers such as their latest iPad app launch. There is no better free platform out there that is helping me manage my money. The entire sign-up process takes less than a minute and is free.
Photo: Will it last? SD, 2013.
Regards,
Sam
Are these numbers still accurate after the housing bubble burst? My net worth would be so much better without having that millstone around my neck!
And I’ll go nuts if I start talking about tax policy… sigh.
[Reply]
Financial Samurai Reply:
March 11th, 2013 at 12:10 pm
Hi Mike – Yes, the article is reflecting my views of the above average couple post the housing collapse. I hear you loud and clear on housing being a drag. I’ve got one of my vacation/rental property as a drag, but things are recovering so keep the faith!
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retirebyforty Reply:
March 12th, 2013 at 9:17 am
Well, if you are really above average you would have picked up some properties during the housing downturn right? :)
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Mike Reply:
March 13th, 2013 at 7:16 am
But that might require more funds/better credit than some people have at the moment!
Howdy Sam,
Love the idea, can’t say that we are even close to being where we should. That being said, do you think that the couple’s chart should have a variable for kids – since they suck money like the little adorable devils that they are? Not that a single person doesn’t have kids, but I guess this seems to presume a DINK lifestyle. For instance, we’d be saving $20K+ a year if we didn’t have to pay for childcare (and that’s cheap!). Just a thought.
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Financial Samurai Reply:
March 11th, 2013 at 12:05 pm
Good question. To account for potentially one spouse not working and for kids, the Government Taxation method and Financial Samurai method for calculating an above average couple’s net worth only increases the above average single person’s net worth by 15% and ~65% respectively.
The Equality method is much more black and white (doubling of single person) to create a DINKS couple, but not necessarily as above average couples figure out how to save more in plans such as the 529 for their kids.
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I am a little behind your charts, but I feel like I am on the verge of making a big breakthrough (after all I just finished school and started life as a professional). I have to disagree with your comment that we “count on no one” in the context of saving with a spouse. I’m pretty sure if I went into my marriage with that attitude it would make it almost impossible to stay together for the long run. That being said, it is your opinion so you are entitled to it!
[Reply]
Financial Samurai Reply:
March 11th, 2013 at 6:22 pm
Nick, it’s hard to use my charts to assess where you are as a recent graduate. However, I would use them as benchmarks/goals as you get older. I’ve done a pretty deep analysis and I really think these figures are realistic for those who maximize their pretax retirement accounts and save even more over time. Things really start adding up!
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Hey Sam….unless I read too fast, these charts appear to assume the couple is the same age roughly? Im 42 and my wife is 31, do I go off my age or halfway between our ages to find out where we should be?
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Financial Samurai Reply:
March 11th, 2013 at 6:20 pm
Good question. You can add up the individual persons net worth in the first chart as one solution. Or you can average out the ages/work experience to get a rough estimate as well. Good observation.
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Meredith Reply:
March 20th, 2013 at 3:43 pm
This is what I did… My husband is only 2 years younger than me chronologically, but I graduated HS a year early and then was on the 3 year plan at College, while he was on the 5 year plan. So his working age is app. 4-5years “younger” than mine. When I add up his Average Net Worth and Mine based on our “working ages” and then adjust out for the cost of my MBA, you’re numbers are really on target.
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Financial Samurai Reply:
March 20th, 2013 at 3:45 pm
Good to hear some continued verification of the numbers.
Out plan is to now keep on going!
Wow, I thought I was doing ok. This is eye-opening, but it’s a bit of a downer.
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Financial Samurai Reply:
March 11th, 2013 at 5:19 pm
Don’t be down, be motivated!
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My g/f has zero interest in finance, yet she’s the one in our relationship who looks like she’s been following the FS method her whole life. I had to make one hell of a sales pitch to get her to see that she shouldn’t have the majority of her net worth in a savings account, but hey, noone’s perfect!
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Financial Samurai Reply:
March 11th, 2013 at 6:19 pm
That’s what the GF has you for! You’re the PF buff so she doesn’t have to be.
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I think you will find that your above average person is pretty rare. I am a little surprised about the post tax savings. Are you including a taxable brokerage account?
BTW, the gender bias you mention in taxes is interesting. It could be a woman who is earning the $400K income and there is a stay at home dad or spouse. Just a thought!
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Financial Samurai Reply:
March 11th, 2013 at 3:08 pm
Indeed!
You probably missed or did not understand where I wrote the reason for the gender bias. The government and its 12.5% increase in allocation for couples and the fact that the rules are predominantly made up by men in government.
Downton Abbey, Larry.
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krantcents Reply:
March 11th, 2013 at 5:15 pm
I think you are giving our legislators too much credit! Just look at the partisanship of the recent decade(s). Corporate policies get more scrutiny before enacted.
[Reply]
Financial Samurai Reply:
March 11th, 2013 at 7:05 pm
Larry, how else do you explain only a 12.5% increased allotment in income for married couples vs singles if the government is not sexist?
Geek Reply:
March 13th, 2013 at 10:48 pm
It seems to me that the 12.5% increased allotment only applies to 1% of couples O_o
Well, we’re behind a little, my spouse was a stay at home Mom for 14 years, has an engineering degree and an MBA and is now a high school math teacher. I am an engineer by trade but now in manufacturing management. We’ve sent 2 kids to private college, they’ve incurred minimal debt <20k each, hopefully big earning years ahead for us, target retirement age 60, healthcare could be an issue.
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Financial Samurai Reply:
March 11th, 2013 at 5:21 pm
I’m impressed your wife has an engineering degree and an MBA. What was the reason for going through such intense schooling? I’m going to explore this topic of getting an advanced degree and retiring early in a future post and I’d love your insights. Thx
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Marcus Lewis Reply:
March 11th, 2013 at 5:38 pm
Sam
We graduated in ’83 tough economic times (sound familiar) and moved to the gulf coast, where I had a job. She couldn’t find employment, so she returned to school to get her MBA, worked for a couple of years at IBM, then ” retired” to stay at home with kids until she got her teaching credentials through an alternative (no more degrees) program. She’s been teaching for 10 years now. Couples with a stay at home parent are not represented in your tables?
[Reply]
Financial Samurai Reply:
March 11th, 2013 at 6:19 pm
Got it. Thanks for the insights. All three tables take into consideration one or two stay at home spouses, depending on level of net worth. If one spouse stays at home sooner and for longer, clearly they may be an adverse impact on the estimated net worth over time.
What are you basing these numbers on? What percentage of couples are considered “above average?”
For example, what % of couples have a net worth of $162,000 at age 25?
[Reply]
Financial Samurai Reply:
March 11th, 2013 at 7:17 pm
Above average is quite subjective as it is based on my assumptions of the above average individual. However, by definition, above average in my book is anything more than 1 standard deviation above the normal distribution curve eg couples who perform better than 84% of other couples. If we talk 2 standard deviations than the definition tightens to better than 97.7% of the couples today.
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Sam,
I’m using your chart to measure our net worth progress, however we are heavily tilted in real estate. Here in Hawaii prices were similar to the Bay Area, it softened but didn’t drop much. The problem is we have rental properties that are many years away from being paid off, which doesn’t create a lot of passive income. The problem is our after tax savings are nowhere near your chart, I’m going to have to talk to the wife about not taking so many expensive vacations. By the way your city is my nemesis as the shopping is too enticing for the wife, the only reason why she stopped was the weight limit on the luggage. You forgot about the shopping tax.
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Financial Samurai Reply:
March 12th, 2013 at 8:20 am
Charles,
Great to year from you. It’s been a while. How are things in Oahu? Heard Japanese tourism is really picking up again. Are home prices in more prime spots inching higher?
One of the cures to no longer buying expensive LV bags is to ask your wife to study LVMH’s income statement. The gross margins will shock her into never buying one again!
Sam
[Reply]
charles@gettingarichlife.com Reply:
March 12th, 2013 at 11:55 am
Tourism is at a record pace. The growth has been from Korea and China. Prime
areas of real estate are inching up with an expected increase of 3-5%. That’s
a nice increase for your Kaimuki home.
The only shock the wife has been through is that its been nearly a year and she
hasn’t bought or visited a store.
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Financial Samurai Reply:
March 12th, 2013 at 12:55 pm
Good to hear. I’m sure Chinese money must be looking to buy assets in Hawaii.
How about areas such as Waianae? Will that area ever get expensive?
We’re behind by about $150k for the 30 year mark. Although we still have the rest of this year to make up some more ground. Having a 1.5 year layoff put a damper on those plans but we’re making up for lost time now.
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Financial Samurai Reply:
March 12th, 2013 at 10:41 am
A lot can happen in a year JC. It’s fun to shoot for goals, otherwise things get kind of dull.
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I really liked this post. One thing I suggest is that all couples equally be aware of their finances. Relying on one person to do everything doesn’t work very well. If a couple is struggling with a lot of debt and only one person is aware, the other could end up causing a lot of damage spending recklessly and not putting any money towards saving and paying off debt. Knowing how to be in control of one’s financial situation is the first step to freedom.
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Financial Samurai Reply:
March 12th, 2013 at 10:43 am
Teamwork is so key. I think it’s great to work together to build a healthy financial future and also work on one’a individual independent health. It’s a win for both, especially if a couple decides to stay together forever.
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Pretty well right on for us as a dual-income family. I could see it being harder for people in an area with lower salaries, but then again, they have lower expenses as well.
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Financial Samurai Reply:
March 12th, 2013 at 10:45 am
Good stuff. The expense point you point out is important. People who make higher salaries tend to live in higher cost of living areas. Therefore, a blanket federal income tax rate not based on zip code is hard for many. Then again, everybody has a choice to move around the country.
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Great job Sam! I think there is synergy when you meet the right person as well. It’s cheaper to live as a couple than 2 single people. The Financial Samurai method is almost as high as the double method. The pre-tax saving numbers are very big in your chart. I don’t think many people can meet that goal. Compare to your FS method chart, we are quite a bit behind in the pre tax category and ahead in the property.
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Financial Samurai Reply:
March 12th, 2013 at 10:47 am
Thanks Joe. I hope readers see these charts as motivating to help them achieve their financial goals. The above average definition is those one standard deviation beyond the midpoint of the normal distribution curve.
If I continue to stay retired, my pretax savings amounts will be much lower than my charts as well. However, my post tax savings amounts will be much higher so it all balances out.
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Sam, what percentage of the US population would fall in to this chart for singles 25 an above do you think?
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Financial Samurai Reply:
March 12th, 2013 at 10:44 pm
Hard to say exactly. Less than 16% given we are talking 1 SD.
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We’re just a little below your table for our age. And by a little, I mean a lot. And by a lot, I mean we have a negative net worth ATM. :)
I have the pre and post-tax savings of the 23 year old couple, but my wife is 25, and I am 27. Our house dipped under, but I expect a recovery and a decent amount of equity in the next 5 years. The one problem is earning power. We are bringing in enough to pay our bills and put away 6% pre-tax savings, and that’s it at the moment.
Mostly, I’ll be looking for ways to increase income even more to catch up to these figures. I really like them as a goal, and even if I get halfway there, I’ll feel pretty good at retirement time. My wife is at home, and I am working a few jobs, but she’ll be starting up a side business in the next year, and that’ll help the net worth/debt paydown/investing/saving for our household.
Thanks for the in-depth analysis on this Sam, always fun and motivating to read.
[Reply]
Financial Samurai Reply:
March 12th, 2013 at 10:44 pm
It’ll be great to have your wife work on a side business again to boost the family income. Good luck and hope you are surviving tax season!
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That’s a pretty nice asset allocation! I think it is important for both partners to try to work a decent enough paying job but also be aware of the fact that money needs to be earned through side hustles to be able to get things arranged accordingly. And it also takes financial discipline to set that money aside/investments.
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We’re close on the Pre-Tax Savings government side, but after that apparently we’re behind. Poor decisions in our 20′s left us behind, but we’re in the process of making up for it. Saving approximately 24% of our income now at this time and I actually hope to increase this if we can moving forward. Also, we’re working on a “side hustle” as Mike said.
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My wife (31) and I (38) are on track but our mix of assets is skewed. We have pre-tax savings of $540K, after-tax savings of $825K, and property equity of only $20K to give us a net worth of $1,380,000. We are adding about $125K to our net worth every year primarily through after-tax savings. I think we need to diversify our asset mix to include more real estate. We could use a larger house but we are skittish about real estate due primarily to the increased monthly fixed expenses (higher utilities, water, property taxes, maintenance, etc.) and the increased leverage. Are we being too conservative? It would be nice to enjoy a nicer house but the increased costs really bother us. We like having the flexibility to live on less than we make. It keeps the stress of my job lower knowing that we don’t need the income to support our lifestyle.
P. S. We really enjoyed the article!
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Sorry I’m late to the party on this one, Sam. I was anxiously awaiting this post since you mentioned it a few weeks ago!
We’re 30 and at $454K, but I’m pretty confident that we’ll surpass $479 easily this year, even if the market goes a little sideways or takes a couple steps down since we’re saving a lot of our take-home pay.
That said, our split between asset categories (RE vs retirement accounts) is tilted more heavily toward real estate for now (~45%). But the big reason for that is because of when we got married and really started working as a team. It was in 2009 and RE was half price (or cheaper!) compared to historical trends. So we bought as much of it as we felt we could comfortably leverage at the time – it felt easier and safer to lever on RE than it would have to take leveraged bets on the stock market.
But we expect the asset balance will level out over the next five years or so.
[Reply]
Financial Samurai Reply:
March 13th, 2013 at 7:47 pm
Nice. Sounds like a layup getting to 479k for you guys for sure.
These numbers aren’t an exact science by any means. They are rough guidance figures for those looking to achieve financial security by their 50s and 60s.
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I am feeling very above average today.
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I guess I need to start making more money if I’m going to fit into this mold. I will also have to tell my stay at home fiancee to go get a high paying job.
Sam, it surprises me that you are still in the old thinking that you need to save money for financial prosperity. The more progressive thinkers say you just need to generate income (ideally passive income) and you can retire at any age.
I’ve stopped caring about my net worth, and I only care about building passive income.
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Financial Samurai Reply:
March 14th, 2013 at 7:40 am
How do you generate true passive income that is meaningful without making and saving more money?
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Geek Reply:
March 14th, 2013 at 10:02 am
Write a book and collect royalties
Get a rental property (…which puts your net worth up a notch.. hmm)
Buy stock (wait, net worth again to generate any meaningful passive income)
Own a business (and then your business has worth)
Pension (because that’s dependable these days!)
…
I think I see Sam’s point after wikipedia-ing the subject.
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Financial Samurai Reply:
March 14th, 2013 at 10:31 am
You may enjoy this post about my passive income
http://www.financialsamurai.com/2012/04/16/achieve-financial-freedom-slice/
Geek Reply:
March 14th, 2013 at 9:27 pm
Who me? i’ve read all your stuff here ^_^ I just wanted to see if there was some way besides having big money to generate passive income… turns out it’s all about writing books.
Financial Samurai Reply:
March 14th, 2013 at 11:03 pm
Books aren’t that great for most. You’ll see in an upcoming post. Stay tuned!
Question: what data source are actual assets (vs planned assets) based on — where you then take the one standard deviation beyond the midpoint of the normal distribution curve (top 16%)?
If I understand your logic, this analysis is based on planned asset values…correct? That is to say: if an individual saves, invests at certain amounts, then this is the PLANNED amount you should have.
However, planned is not the same as ACTUAL. I am interested in what people are actually worth. From this, I want to take the one standard deviation beyond the midpoint of the normal distribution curve (top 16%). Does this make sense? I feel that this analysis is based on planned figures, not actuals.
Financial net worth is relative. After all, if we are all millionaires, we are all poor…it is by how much more or less we are than the mean that measures our net worth…..and doing so by actual net worth asset values (vs planned), is what I’m after.
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Financial Samurai Reply:
March 14th, 2013 at 12:47 pm
Hi John,
The actuals for what I believe the above average couple should be worth are in my chart. Share with us your story and net worth.
Cheers,
Sam
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john Reply:
March 14th, 2013 at 2:25 pm
Hi Sam,
Well, i’m 35, just reached the 500k (self-employed, 250 in retirement, 250 in non retirement investable assets…still a renter (but have a small investment property))
I like the site (if you google “average net worth”, guess what comes up).
The fact that this topic is popular on here may serve you well if this was expanded a bit more (which you just did with the couples angle, but perhaps looking at other data sources to help quantify what people’s net worth is…and perhaps with respect to geography/cost of living…also how to maximize your relative net worth by moving to a low cost area — which I plan to do (abroad)!. Keep it up.
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Financial Samurai Reply:
March 14th, 2013 at 5:11 pm
Good to hear Google is working.
I’ve taken a different approach if you read the average net worth for the above average person post.
I reverse engineer how much a person (and now a couple) should have by various ages to give them the best chance possible at a financially comfortable retirement. It just so happens that the figures that I’ve calculated turn out to be much higher than the average and median net worth in America that lies anywhere between $100,000-$250,000 between ages 35-65 depending on which study you use.
$100,000-$250,000 is NOT enough, which means the country is going to have a huge financial burden as we take care of more people who cannot fully take care of themselves. I hope this article really gets people thinking and motivated to save and invest more. There is no guarantee the government will continue to bail us out.
Here are a couple other posts you might like:
http://www.financialsamurai.com/2012/02/21/how-to-retire-early-and-never-have-to-work-again/
http://www.financialsamurai.com/2013/02/05/median401k-retirement-balance-by-age-is-dangerously-low/
Thanks
Hi there! I thought this article was very interesting because I feel like it is really difficult to know how you are doing. Thanks for all the work you put into calculating these numbers. I was pleased to realize that it looks like my husband and I are ahead of the game… at least for now! Who knows how drastically things will change when we have kids in the near-ish future.
We are both 31. I started working at about 25, my husband at 26. Both of our salaries have increased substantially since we entered the workforce. With bonuses, I expect to pull in around $190K and he will get around $100k (and don’t get me started on the sexist tax code – I completely agree with you!). Our net worth is around $770k. I still have student loans from graduate school but at 2.375% interest I’m not too worried about it. We max out both of our 401ks as well as our back-door Roth IRAs plus save for retirement after-tax. Everything is in low-cost index funds. I am fortunate to receive a 6% match plus another automatic 4%; my husband for the first time this year will be getting a 5% match.
I love your point about both partners being secure enough so both can choose the path they want. My husband recently took a new job that required a $30k paycut but we took the risk and did it because we knew we could handle it financially. We know a lot of people don’t have this luxury. He is enormously happier and it was absolutely worth it. I feel incredibly fortunate to know we have these options. I came from a single income family with a disabled non-working parent and that definitely was never an option for my dad. He isn’t a saver himself, but I think my understanding from a young age that I would have to financially support myself and, eventually, probably my parents too, stoked my savings bug.
My goal is to save about 30% of our gross earnings for retirement and another 25% for short-term savings (like home improvement, musical instruments, electronics, new cars, vacations). We have a small house in a cheap city that we bought for 215k that was recently appraised for ~300k when we refinanced. We’ve put a lot of money into it, but it’s been for our enjoyment, not investment, and we’ve truly enjoyed those improvements, which we paid for in cash. We are now on a 10-yr mortgage at 2.75%. Not sure if that the best idea but psychologically I just could not handle paying more to the bank in interest than I was putting down in equity, and since our house is so small. We also don’t have any car payments and have saved up so we don’t ever have to have one again, if we don’t want to.
I love budgeting because to me it is a way to dream about the future. I also budget in part because I think it gives me the freedom to spend money, otherwise I think I honestly would save even more. I work hard to make sure we aren’t sacrificing our quality of life today or in retirement. I am pretty happy with the set-up we have. I know our savings and investing style probably won’t ever make us rich but I also feel comfortable that we won’t have to go live in a ditch in our 80s, and that’s alright by me.
Sorry for the long post but the other commenters and your article were inspiring! Thanks again for the great info.
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Financial Samurai Reply:
March 14th, 2013 at 7:11 pm
Well done AO and thank you for agreeing with me on the sexist government and ridiculous tax code.
Good to hear you guys are making such a high combined income compared to the cost of your house. It is rare for couples to make more per year than the total value of their house!
How did you end up finding my post curious to know? I always welcome new readers who bring about new perspectives. I really think you two would benefit well with Personal Capital to track your finances and manage your net worth. It’s free and my favorite financial tool.
Hope you subscribe and keep in touch!
Best,
Sam
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AO Reply:
March 14th, 2013 at 9:57 pm
Hi Sam, thanks for the reply! When we bought our house, it was more like 2.5X our income – we have come a long way in 5 years! I found your post through a random Google search for something like “average net worth for 30 year old.” And it was exactly on point! I will definitely check out Personal Capital – it looks like it has some features that aren’t offered by my current programs of choice: YNAB4 (which I like a whole lot for budgeting), Mint.com (which I’m not a huge fan of but it serves a purpose), and the Morningstar Portfolio Manager (which is good but tedious to enter in data manually)… and of course my Excel spreadsheets, which you’ll have to pry from my cold, dead fingers. Thanks!
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Financial Samurai Reply:
March 14th, 2013 at 11:01 pm
Gotcha. Interesting this post comes up rather than several of my other posts. Maybe several of them come up and you just choice the one with married couples?
Good stuff ramping up your income over the past five years. Temptations to upgrade your house?
AO Reply:
March 14th, 2013 at 10:52 pm
PS – and now that I’ve read through other parts of your site – in particular “Why Do People Like To Reveal Their Income?” – I feel like a bit of a jerk! I personally never ever talk to real people about our household income except my spouse and my dad. But the anonymity of the internet allows a nice break from the silence. Thanks again for the thought-provoking posts.
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Financial Samurai Reply:
March 14th, 2013 at 11:00 pm
Ha! Don’t worry about it. The most is directed more for folks who have a web presence or who incessantly like to talk about their income in front of people.
AO Reply:
March 15th, 2013 at 7:32 am
Re: finding this post – to be more accurate I first landed on “The Average Net Worth For The Above Average Person” through Google, and then clicked on the link in that post to get here.
Definitely temptations to upgrade to a bigger house, but we realized that we don’t need any more right now. We’ve decided to hang onto it until our family grows so that we have a better idea of what we will actually need. Also, the improvements we’ve completed make me loath to let go of the place. I have a bathroom built exactly the way I want it and a custom front door with stained glass that I designed… things I’m just not gonna find in a new place, no matter how great it is.
Financial Samurai Reply:
March 15th, 2013 at 8:24 am
Cool. Being content with what you have is one of the greatest attributes for being wealthy. Enjoy your home for the long term! Now that the RE market has heated up, I’ve been wrestling with the temptation to sell. But u realize in 10 years I will be kicking myself that I did.
Just a thought but why would you want a 4 million dollar net worth at age 65, wouldn’t it better to stop working at say age 40 and enjoy an extra 25 years of freedom from work?
Freeat33 had a great post on that, save 70% of your salary and 10 years later quick your job. You won’t have 4 million but you’ll have a whole lot of happiness
Just a thought
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Financial Samurai Reply:
March 17th, 2013 at 6:07 pm
I think one of the biggest fallacies is that somehow work and having millions of dollars makes people unhappy. I can assure you that one can be happy working and being well off.
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Nice article, just stumbled on it. I’m 30, my wife is 26 and we’re right in line (actually, even a little above) your guidelines. We’re taking our first step into the rental market soon. I purchased my current house in 2008, near the bottom of the market, fixed it up and should be able to clear $500/month profit on it, plus the tax benefits. Not a huge amount, but a start. We’ve moved up to a slightly larger home, but the new mortgage is less than 95% of our pre-tax annual income. We’re hoping to rinse and repeat, moving to nicer places over the next 10-15 years, while having someone else buy our other homes, so we can continue to invest elsewhere.
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Financial Samurai Reply:
March 21st, 2013 at 6:30 am
Welcome to my site RZ. Sounds like a good purchase and a good win for the long run. Definitely rinse and repeat with property if you can hold on. It’s one of the easiest ways I’ve found to build wealth without having to do much at all.
http://www.financialsamurai.com/2012/10/16/real-estate-is-my-favorite-investment-asset-class/
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My wife and I are both 29. Following the Samurai Method, we are right on par with you chart. Unfortunately, the main difference is that all our “savings” is allocated in post-tax accounts. About 45% is a Roth 401K and 55% in other investments/savings accounts.
I’ve read a lot about Pre-Tax vs Roth 401K, but I can never find a good answer about one or the other. Should we be mixing pre-tax and Roth 401K contributions or all pre-tax for our 401K?
Right now, combined, we put 20% of our post-tax salary into a Roth 401K. Any help would be greatly appreciated.
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DS Reply:
March 19th, 2013 at 2:49 pm
I should also mention that we have been contributing to our 401Ks since we were 22. In addition, we made just shy of 250K in 2012.
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Financial Samurai Reply:
March 21st, 2013 at 6:28 am
DS, my advice is to not contribute to a ROTH. http://www.financialsamurai.com/2012/03/29/disadvantages-of-the-roth-ira-not-all-is-what-it-seems/
Look at Cyprus, and every other mismanaged country. Why admit defeat and pay the government more in taxes upfront when you don’t have to?
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I don’t think I understand the equity portion. If you are putting 20% down in most markets you are already hitting it in year 1 of ownership
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Financial Samurai Reply:
March 21st, 2013 at 6:27 am
Correct. It is accounting, a transfer from cash to equity. And now it’s about growing that equity over time.
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This one got me thinking and re-analyze finances. One great reminder. Well, it’s definitely not too late to double our efforts saving.
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Yeah thanks for this. This answers my other question I posted on http://www.financialsamurai.com/2012/05/14/the-average-net-worth-for-the-above-average-person/ – Keep up the great work sam!
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Financial Samurai Reply:
March 24th, 2013 at 11:02 am
Let me know which method you agree with: Equality, Big Government, or Financial Samurai method for calculating a couple’s net worth.
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Roshan | Hair on Fire PM Reply:
March 25th, 2013 at 3:44 am
I disagree with the equality – unless you plan to be a DINKs your whole life (which is not a bad thing just not for me).
Big Government is ok but a bit too conservative in my opinion. I would say I agree most with FS method. Work hard and save hard in the early years then one spouse has the option to try their own thing. It could range from a small startup / “x factor”, changing careers and taking a paycut or following a passion / hobby that adds a better home life or more time with the kids.
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Sam,
Love reading your stuff, but feel your figures are way off the mark for
most people, above average or not.
I know many people/couples in the “60″ age group, and they are no where near
what your figures indicate. I also think they will have comfortable retirements with
what they have, it just won’t be at the level of lifestyle they enjoyed during their
working years. Many are already retired but they live very comfortably on $3-$6K a month
in the Seattle area. Most have pensions albeit not large ones.
Many will never reach the level of savings/net worth your charts indicate, but they will
retire comfortably nonetheless. Call me optimistic or in denial but I believe it will happen.
Just my opinion.
Steve
lifestyle.
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Financial Samurai Reply:
March 24th, 2013 at 11:01 am
Hi Steve,
Thanks for your thoughts. By definition, “above average” is not most people. Most people based on skewed statistics are not in good financial standing, at least here in the US.
$100,000 in retirement savings at 35 and only $250,000 by their mid 60s is not very good. This post is for above average couples (title, content of post). I think we need to find a better barometer for better financial health, and that’s why I wrote this post.
I have no doubt a couple can live happily off $3-6K/month in Seattle if they’ve paid off their mortgage and live a normal life.
Regards, Sam
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Me: 29, My Wife: 30….over $425k net worth…not bad, right!?
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Financial Samurai Reply:
March 25th, 2013 at 3:26 pm
Better than a poke in the eye!
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Love the website! Great advice. A quick comment about gender equality/inequality. My husband and I both graduated the same time, from the same school and started our careers in Big 5 consulting firms. My spousal unit’s salary right out of college was 30% higher than mine and the gap has continued throughout our career (13 years). My grades were even better than his!
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Financial Samurai Reply:
April 12th, 2013 at 6:30 am
Welcome to my site!
Wow, 30% is ridiculous. Time to lay down the law! But, perhaps your husband is just making more than others within his own firm, which is a win-win for you and your husband?
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FS, Excellent article! Hard to find real numbers out there. One quick point, which may have already been covered, 401K’s only showed up in 1987 and they were limited to $7,000/year/person. Your analysis assumes a 401k deposit of $17,000 every year/per person throughout. My wife and I just turned 60 and judging by your charts we are sitting between the government average couple and the FS average couple (we did better than 5% but we don’t have the after tax savings or the home equity that you suggest). I think it is important to note that your charts are age dependent, that is, if you are 24 today you will need a lot more at 60 than I need at 60 because you will have 36 years of inflation to deal with. If my father had as much money at 60 as I do he would have been a very wealthy man indeed.
On another note I agree with your Roth analysis. I know folks who converted, paying taxes on the conversion during their earning years. I tried to tell them that it would be better to pay the taxes after you retire on the amount you need to take out each year while you have no earned income. Never pay taxes up front in the hopes of not paying taxes later, the rules can and will change, look at Social Security (age of benefit, taxing of benefit, recalculation of increase, etc).
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Financial Samurai Reply:
May 18th, 2013 at 11:40 pm
Thanks Mike and good points indeed. I keep it constant at $17,000 because 1) The maximum contribution figures will continue to go higher probably every year or two, so that’ takes into consideration lower levels, 2) I’m forward looking. The article is 65% geared towards folks who are younger who still have time to save.
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Good post, can you post what % of the population falls in the ranges you lay out during those times? I dont know if that data is available? I’ve always felt that if all world wealth were distributed prorata to the useful life of the world population within 1/2 a generation we would be back a similar distribution as we have today. My wife linked me this post, she is 30, attorney. Im 35, RE Broker, speculator and serial entrepreneur. Right now we are trending in the 50 year old range and having a bit of a conflict. I want to travel more, she is just about to make partner at a bulge braket firm and we cant seem to agree what we need for retirement, her number is 6 million, my number is both of our incomes replaced by passive income, I have achieved the later but she is fixated on her number. So what is more important?
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Financial Samurai Reply:
May 18th, 2013 at 11:39 pm
I would say less than 15%, but that is to be expected as we’re talking about above average.
Regarding your dilemma with your wife, it’s great that she is so motivated. If she can make partner at 31-32, that’s huge and maybe you’ll get to 6 million before you know it. Once you get there though, it’s tempting to want more. 2% on 6 mil is $120,000. Is that enough to live?
I’d sign up for Personal Capital if I were you guys and get a snapshot of all your assets and combined net worth. Once you’ve got a clear picture, you’ll have a better idea of how to plan and get to 6 million with the various scenario analysis tools they’ve got. It’s free too.
Good luck!
Sam
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Hi Sam,
Long time reader, first time commenter. I love these charts but I think one of your main assumptions in putting together a joint net worth target is a bit off. While yes, men and women are equal, it’s unfortunately rather difficult for both individuals to pursue high-powered careers at the same level. Why? Geography. Not infrequently a couple will have to relocate in order for one person to pursue a promotion. Even if the other person has been extremely successful, changing cities or companies will set them back a bit. This has nothing to do with gender — for instance, my husband and I just moved for my job and he took small pay cut. He’ll work his way back up in a short time, but nevertheless he made a sacrifice. Some couples choose one career to follow; others switch off. Either way, it is an extremely rare couple that doesn’t have to make compromises for one another’s careers.
All the best,
SAM
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Financial Samurai Reply:
May 24th, 2013 at 8:19 am
Hi SAM,
You make a good point about one spouse sacrificing his/her career for the other. It does seem rare for both spouses to get their ideal job in a move doesn’t it? That said, if both spouses are rockstars, I think they will do well wherever they go, unless the place is a very sparsely populated area. For example, go to SF, NYC, Chicago, LA, London, Paris, Hong Kong and if you are at the top of your game, you will get plenty of offers. But it takes time indeed.
Cheers,
Sam
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