Suggested Net Worth Growth Targets By Age

US Household Net Worth Chart 2013Methodically growing your overall net worth is what wealth creation is all about. Your net worth is the culmination of savings, investing, real assets, and liabilities. I’m much more concerned about growing my net worth than only growing my stock portfolio because my stock portfolio is just a portion of my net worth.

Think of your net worth like a battleship during a time of war. As the intrepid captain, you are navigating your net worth to glory through sea mines of temptation and unknown icebergs of economic downturns. The greater you build your net worth, the more careful you steer.

It’s always important to think about your net worth in a risk adjusted manner. Putting 100% of your net worth into the stock market isn’t so bad when you’re a single 28 years old with $150,000 to your name. But if you’re 50 years old with a couple kids entering college, you’re likely not allocating your entire $1 million in assets into the stock market.

When I was in my 20s, I didn’t really track my net worth because I didn’t know better. I was focused on my career and saving as much as possible. My idea of net worth diversification was investing as much as I could away from the stock market given my pay and career were already dependent on the stock market. Every year 20%-30% of my compensation was paid in the form of company stock so there was no escape.

For 10 years this strategy worked pretty well because the stock market really didn’t go anywhere from 2000 – 2010 and real estate caught fire until 2007. Now everything is on fire! Let’s just hope the battle ship doesn’t burn down with so much unbridled mania.

I’ve been much more surgical in managing my net worth in my 30s given it has grown to a point where it throws off an important passive income stream. Not having a day job anymore makes it that much more important to protect my financial nut. If I can grow my net worth by 10% per annum, I’m usually satisfied. To put 10% in context, Bernie Madoff was able to amass $50 billion dollars under management because he delivered fake 10% annual returns!

In this article I’d like to provide several net worth growth targets to consider as well as a net worth growth framework by age. I think if I was able to read this article four years ago, I would have allocated more of my net worth into equities and would have a 10% higher net worth as a result. Hopefully this framework will help many of you build wealth.

NET WORTH GROWTH BENCHMARKS TO CONSIDER

1) S&P 500 Index Performance. The index of 500 large cap weighted stocks was introduced in 1957 and makes up 75% of the total US market capitalization of stocks. In other words, the S&P 500 index is the best reflection of the US economy. Returns have been anywhere from -43% in 1931 to +52% in 1954 to +30% most recently in 2013. The average hovers around 8%.

The only way to get ahead if you are behind the average net worth for the above average person is to grow your net worth faster than the S&P 500 index. Targeting the S&P 500 index as a net worth growth benchmark is generally for middle aged individuals.

2) Risk Free Rate. The risk free rate is the 10-year government bond yield. It is risk free because the US government is the most sovereign nation and will pay you back unless we get attacked by aliens. The current risk free rate is roughly 3%, from a low of ~1.5% in 2012. The risk free rate has been coming down for over 30 years as we’ve managed to contain inflation in the US and enact more effective economic policy.

Given I believe the ideal withdrawal rate during retirement touches no principal, growing your net worth by at least the risk free rate should be the base case goal for all individuals, especially traditional retirees over 65 who no longer have strong earnings power. I wrote a three-part series on US Treasuries if you want to learn more.

3) Industry Specific Indices. Every industry has differing rates of growth. It would be unfair to compare the growth rates of the stable telecom industry with the growth rate of the internet industry. You can track your industry’s annual growth rate through the performance of industry ETFs such as: HDG (hedge fund), XLP (consumer staples), XLE (energy), XLF (financial services), XLV (healthcare), XLI (industrials), IYR (real estate), GDX (materials), IYZ (telecom), XLK (tech), and XLU (utilities). You can be even more specific by tracking your own company’s stock price performance if it is publicly traded.

If you want to expedite your wealth, then a large part of it has to do with choosing the right job in the right industry. This is why it’s important to do well in school so you have the options to choose your destiny. The top industries for MBAs are now tech and internet, as opposed to banking and management consulting in the late 90′s.

The Ideal Scenario: A great goal is to make money in good times and bad times. Based on my net worth growth rate benchmarks, an optimal scenario is to earn the risk free rate of return during down markets and match the S&P 500 growth rate during up markets. In order to do this, you’ve got to break down your net worth and make assumptions across each asset class. You’ve got to hedge out risk. No easy task, hence the ideal scenario. I’ll discuss my ideal scenario strategy in a future post.

ASSUMPTIONS FOR NET WORTH GROWTH FRAME WORK

* Risk tolerance: Risk tolerance decreases the older you get due to added responsibilities, a larger net worth in need of protecting, and less time to make up for investment losses.

* Earnings power: Earnings power increases steadily up until about 50 and begins to decline due to age discrimination, risk of termination, less energy, and the risk of not finding work again if terminated.

* Economic variables: Average historical variables of GDP growth 3%, inflation 2.5%, risk free rate 0.5% higher than inflation.

* Education: Graduated from college or attended a trade/vocational school.

* Employment: Continuous employment or livable income since graduation.

* Savings rate: At least a 20% average after taxes over your entire career.

* Net worth upon entering the work force: $0. I realize many students nowadays graduate with debt, but for simplicities sake we start with a $0 net worth. If you have student loans, then think of the educational capital you have to bring your net worth back to zero.

NET WORTH GROWTH TARGETS BY AGE CHART

Suggested net worth growth rate targets by age

18-30 YEARS OLD: EXTREME NET WORTH GROWTH PHASE

Between the ages of 18-30 you should be in the extreme net worth growth phase. If your net worth is $10,000 at the age of 23 one year out of college, it should be fairly easy to double your net worth to $20,000 if you make $40,000 a year and live rent free in your mom’s basement.

You’ve literally got nothing to lose when you’re young. It’s important to take calculated risks in your career and in various investments because you’ve got plenty of time to learn from your mistakes. You’re also able to have a redo by going to graduate school.

Net worth growth rate target per annum: 50%-100%+

31-35 YEARS OLD: RAPID GROWTH PHASE

Age 30 is a big milestone for both men and women. Speaking from a man’s point of view, we either will have “made it” or know we are on the right path to making it at age 30. Income should be much greater than income in your 20s, which should help accelerate savings and investing. 31-35 is the median age where most Americans buy a home.

After 8 to 13 years of contributing to your 401(k), you should have roughly $130,000 – $330,000 if you follow my 401(k) by age chart. You begin to see the growth of your assets make a difference to your overall net worth. No longer is it just about making more money by going to work. It’s about making your money work for you.

Net worth growth rate target per annum: 25%-50%

36-40 YEARS OLD: HIGH GROWTH PHASE

You begin to take risk off the table because you might have dependents. No longer are you going to have a majority of your net worth in stocks when you’ve got a spouse and a little one to put through school. Your parents are likely in their 60′s to 70′s if they are still around and you’d like to set aside some time and money to care for them if needed.

36-40 years old is a great time for income growth as you’ve now got 10-18 years worth of experience. You’re old enough to get real respect from your employees, clients, and managers. In terms of love life, 35 years old is also the golden cross of love for men. Your net worth is much more diversified now with real estate, stocks, bonds, and risk free assets. If you don’t have any dependents, you can afford to take more risk.

Net worth growth rate target per annum: 10%-25%

41-55 YEARS OLD: NORMALIZED GROWTH PHASE

After 20 years of saving and investing you’ve grown a respectable sized nest egg which you’d like to protect. You begin to tire working for the man so the thought of your retirement nest egg losing any value petrifies you to be more conservative with your investments. You’ve got a propensity to hoard cash like the rich.

With 25-45 years left to live on average, you can’t get too conservative. You’re actively looking to generate passive income streams or spend more time on optimizing your income producing investments. Assets that provide yield such as high dividend stocks, annuities, and muni bonds start looking appealing.

Net worth growth rate target per annum: 10% – 15%.

56-70 YEARS OLD: MAINTENANCE PHASE

You don’t necessarily have to be 56-70 years old to be in the net worth maintenance phase. If you’ve achieved your desired financial number at a much younger age, staying in the maintenance phase is fine too because you’ve got all the money you need.

With a minimum net worth return based on the 10-year risk free rate, you are assured to earn at least 3% on your net worth every year. On a large number, 3% is enough especially now that you’ll be able to withdraw from your pre-tax retirement accounts and receive Social Security.

Net worth growth rate target per annum: Risk free rate (3%) – 10%.

71+ YEARS OLD: REDUCTION PHASE

If we spend all our years slaving away at a job and die without enjoying everything life has to offer that would be a crying shame. I conservatively bake in a negative net worth growth rate to allow people to spend their money beyond the risk free rate of return even though the ideal withdrawal rate in retirement doesn’t touch principal. The ideal scenario is to earn enough to happily live off your dividends and interest to guarantee you’ll never run out of money. You’ll also be able to pass down your assets to the next generation and to charities.

If you find yourself with more money than you need, you can afford to take more risk with your net worth if you’d like. However, by this age I think you’ve figured out what makes you happy, and making more money likely is not necessary. It’s much more rewarding using your money to help other people instead. 

CONCLUSION

Obviously everybody’s lives aren’t going to go according to plan or follow my various life stage descriptions. Some may find themselves long term unemployed during their supposed high earning years. Others might have hit the jack pot earlier and decided to de-risk because they’re completely satisfied with what they have.

2013 should be considered an anomaly never to be experienced again. I certainly hope we do see another 30% increase in stocks coupled with a double digit rise in real estate values, but I don’t recommend baking such numbers into your retirement pro forma calculations. It’s much better to be conservative and end up with too much than come up short when you are no longer capable of working.

Once you get to a comfortable net worth level I encourage you to shoot for a 10% annual growth rate. My definition of a comfortable net worth is when you become UNCOMFORTABLE losing any more than 15% of your net worth in one year. A 10% annual growth rate is close to the historical S&P 500 average annual return. 10% is also roughly 3X the risk free rate, which ensures that you are staying ahead of inflation while not putting too much of your net worth at risk.

During bull markets, greed is going to really tempt you to go outside your risk tolerance zone. Definitely be honest with yourself in knowing what you can stomach to lose. During bear markets, fear will make you hoard cash and miss investment opportunities. You might even develop a notion of wanting to spend all your money before the market loses it all for you! In either environment, try and be disciplined to sticking with a net worth growth target. I hope my net worth growth framework helps!

You can track your net worth by aggregating all your accounts on Personal Capital’s dashboard. It’ll provide you a graphical chart to show how your net worth changes over time and an input section where you can manually adjust subjective values such as real estate to come up with an overall picture. They’ll even send you a net worth update once a week by e-mail. It’s so much easier than tracking your net worth in Excel.

Readers, what is your net worth growth for the past 12 months? Do you agree or disagree with my various growth phases and risk tolerance levels by age? Once you reach “your number,” what growth rate are you willing to accept?

Regards,

Sam

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. Mrs. Pop @ Planting Our Pennies says

    Our 2013 net worth growth was 49.6%, ending the year at $624K and 31 years of age.

    We model everything with a relatively conservative 6% growth rate after we reach FI.

    • Financial Samurai says

      Nice job! Your growth rate, age, and net worth amount (I assume “our” means two) all correspond nicely to my chart.

      One more 50% year and you guys will be knocking at millionaire status!

  2. Dee @ Color Me Frugal says

    Thanks Sam. I enjoy reading your articles because they give me an idea of where we should be financially- or where we could be. We actually doubled our net worth this year (we’re 34 and 39), but I think that was in part because we took new jobs in 2012 that pay more and have allowed us to hugely increase the amount that we are saving and investing. That plus the market rise meant 2013 was a pretty good year for us. We will see how 2014 shapes up- probably won’t see such a meteoric rise in 2014, but you never know :-)

    • Financial Samurai says

      Can’t ever complain about a doubling of net worth! Well done. That’s incredible! I’d love to read a post about how you did it. I’ve got an upcoming post on what I plan to do to achieve my ideal net worth growth scenario.

  3. Nick @ Step Away from the Mall says

    I had a monster 2013. I forget the # off the top of my head, but it was in the 30s. 2012 it was a little over 50%. Making several lifestyle adjustments in 2014 and taking a new gig with a pay cut to accomplish that, so I’m expecting a year of slower growth. I invest heavily in the stock market, so there’s some “what the market does” effect on the growth, too.

  4. nbsdmp says

    Love the post…so any chance you can complicate it a little bit more with your opinion on this subject. Take yourself for example…if you are in your mid-thirties but are significantly above the NW target, should you really be shooting for 10-25% increase each year? Is there some adjustment factor for the above average NW accumulator? It is not as hard to increase your NW 20% when you are at $500k and still in the prime earning years…but once the number gets bigger at a relatively younger age (for talking purposes say larger than your scale goes to at $3M) does the % annual increase essentially go towards the risk free rate? I guess what I’m asking, is at what point do you suggest moving to playing 90% defense and 10% offense (like the 70 year old dude)…does my question make any sense?

    • Financial Samurai says

      Absolutely, which is why I included the Risk Tolerance column and suggested Net Worth levels. If you’ve got $2.5 million by 35, perhaps you want to go shift into the Maintenance Risk Tolerance level which corresponds to a 3-10% annual net worth growth figure.

      Everybody’s desire for money and risk tolerance will be different, so the chart should provide Multi variables from which to choose instead of just choosing by age.

      • nbsdmp says

        Gotcha, I sort of figured that. So with super young retirees like yourself are you still going to be in wealth building mode until you hit 71 like in the chart? Or because your financial nut was bigger at a younger age does that tipping point come a little earlier for the super accumulators?

  5. Mike says

    Another nice article, Sam. We’ve experienced the stock growths that you describe here, but unfortunately our rental home’s value continues to lag (after what was a nice increase during the summer months, which has now gone away). I’m really looking forward to the day its value actually equals what we owe, since we remain so far upside down that it really drags down our net worth.

    • Financial Samurai says

      Mike,

      Remind me where you guys live again? I’ve seen some robust property appreciation charts by city/state for 2013 and so long as you don’t live in Arkansas, there should have been decent progress.

      • Mike says

        Sam, I just discovered this reply after coming back here to refer this post to a friend. The house is in the Tacoma / Olympia, WA area (and it has gone down even more from when I posted this!). It really is a mill stone around our necks, but we’re paying it off very aggressively and have been lucky to have great renters the entire time (so far!).

  6. Matt says

    Due to my own stupidity and some hard-learned lessons, I missed out on several prime years for growing my net worth. I’m now in super-go mode and am trying to increase net worth by at least 25%/year. I ended 2013 with something like a 150% growth but that’s not entirely sustainable and was driven largely by focusing on paying off debts. 2014 is for increasing income and growing some passive income streams, hopefully.

      • Matt says

        Choosing an undergrad major that did not make me very employable, necessitating grad school for a “get-my-foot-in-the-door” MBA. Building up approx. 40k in consumer debt (which will be paid off in a month). Taking a very low-paying job right out of school. Etc, etc. Lessons learned, though. Onward to bigger and better things.

  7. jane savers @ solving the money puzzle says

    “Given I believe the ideal withdrawal rate during retirement touches no principal”

    Do you ever think it is acceptable to touch the principal? At a certain age perhaps? We can’t live forever and you can’t take it with you.

    My net worth is still a negative number and I am in my late 40s so I will be spending my principal at some point in retirement.

    • Financial Samurai says

      Hi Jane,

      It’s just the “ideal” situation. It’s something I encourage people to strive for, including myself, which is why I have a passive income goal that I have yet achieved.

      In my post, I bake in a Reduction phase so people do spend down their principal. Can’t take it with us right?

      S

  8. Liquid says

    Looks like I’m pretty much right on track with the suggestions in your table Sam :) At 26 years old I’m within the suggested range at $210K. However my net worth only grew by 49% in 2013, so maybe I can be a little more audacious with my investment decisions this year. I also compiled a list of target net worths for people to aim at. But yours is more detailed with growth phases and risk tolerances :D Mine is pretty basic, but it seems we have very similar ideas about the appropriate net worth to have at different age groups. http://www.freedomthirtyfiveblog.com/resources/median-and-average-net-worth#age

    • Financial Samurai says

      Fancy charts! Nice job compiling them. I wanted to take the information and create more action. I think it’s the MBA in my trying to always find solutions to problems, not just highlighting info.

  9. Done by Forty says

    Just sent this article to a friend of mine, as we were having a discussion on how to invest based on where he is in life right now. I am furiously trying to make up ground for my negligence during my 20′s. Lord knows I wish I could go back and teach younger me to invest and take risks. But now they’re just sunk costs…

    • Financial Samurai says

      All is good b/c you know what you want and you’ve still got a lot of time anyway. If you’re done by 40 then you’re ahead of the vast majority of folks!

      Tell me about the fun stuff you did in your 20s! I try and live vicariously through others b/c I was pretty damn focused and I don’t think I had as much fun as I should have.

  10. Paul says

    I was a little worried when I saw how much someone in my age group should have in Net Worth, but then I decided I need to include my military retirement and VA disability. These are two income streams that “should” never go away, though congress has recently put a kink in future retirement cost-of-living raises. Here is how I figured it: I took the amount of my monthly checks, multiplied by 12, then divided by 4%, i.e. the amount of withdrawal one would typically make from a retirement account in order to maintain principal. Does this make sense to you? Do you think this valuation of these income streams is valid? After my calculations and adding these numbers to the rest of my Net Worth, I fall comfortably within your window for my age group.

    • Financial Samurai says

      Paul, it makes absolute sense. If you have guaranteed benefits for life after retirement, you have Golden Angel Wings! Take the annual benefit amount and divide it by 4% to get the capitalized value of such a guaranteed stream.

  11. Broke Millennial says

    Well, I’ve got 5.5 more years in the extreme growth phase. When I cut my rent check I do wish I was living in mom and dad’s basement where the cost would be MUCH less than the grand a month I pay for the “privilege” to live in NYC. I would say those who are married with children in the 18-30 range probably are a bit more risk adverse than those of us who only have to be concerned with ourselves. One of my goals for 2014 is to become more aggressive with investments because you’re right, I really don’t have much to lose.

    • Financial Samurai says

      Sounds good Erin. And what you do lose will be a great learning experience for your investments when you’re older and have more money.

      NYC really is awesome. Time of your life I say! Enjoy it and take those risks!

  12. Fatchance says

    NW up 19% but I never really change my house value. I just have that listed as what I think I could sell it for in 30 days or less. My stock portfolio is up 24.5% but since I have added cash to it this year I do not think I am even close to outperforming the market. I feel like I am more aware of my personal finances than anyone I know. But when I read your articles and take 5-10 minutes to think them over, I feel like I am not doing near enough to maximize my efforts. I will continue to work on that. In 2014 I will work to save more, invest more, pay less in fees.

    • Financial Samurai says

      25% is a solid blended return in equities. It would actually be odd if you came to this site and thought you were even more gung ho about personal finance, since this site is almost 100% personal finance and not a general site.

  13. Mark Ferguson says

    Great article an insight. I am in the rapid growth phase and thanks to real estate increased my net worth well above the suggested figures. I have seen 50% growth in the last few years every year. That’s not just appreciation but buying properties below market and fixing them up.

  14. Joe says

    I like how you break it down by age. We are entering the 41-55 phase and our target is to normalize growth. Isn’t 10-15% a bit high?
    It’s a bit high for us because I’m not working full time anymore. I’m shooting for 8-10% annually. We also need to figure out how to avoid big losses. I’m afraid of the next market turn down.

    • Financial Samurai says

      8-10% and 10%-15% has 10% as an overlap right? Most people still work at age 40. Imagine if you still had your engineer salary and company stock how much more you could grow your net worth.

      Protection is definitely key.

  15. Derrick says

    Good stuff, as always, and very timely since my wife and I do a regular net worth analysis twice a year (July 1st and Jan 1st). We’re just within range of your suggested net worth (assuming value of property minus what’s owed is accounted for), and still aggressively climbing our way out of her debt. (Doctor of optometry wasn’t cheap).

    This year, there will be a big change as I prepare to open a restaurant, which if it goes well, will help boost our savings very quickly, or if it goes badly, will cost us to fall behind (small initial investment, but the absence of steady income will be felt). Also, getting health insurance without corporate will be an interesting process as well (my wife owns her own business, and now I’ll be shifting to business ownership too, so we can no longer rely on a company health insurance plan).

    Thanks again for the great post!

  16. krantcents says

    I think your targets are very reasonable! The key is starting young with a small amount of money. Having a clear goal and plan may be difficult at 22 years old, but you have to start with something. Most people do not start and think you can catch up later.

    As I watch my net worth grow, I keep raising the target. It may be one of the reasons, I am delaying retirement to max out Social Security and have a reasonable pension (including lifetime medical). I expect to have some difficulty with the reduction phase! Istart withdraw at a 2% rate until I get comfortable.

  17. Chris says

    Sometimes when I see these kinds of suggestions, it makes me want to kick myself in the butt for not having saved a penny during my 20′s up to mid-30′s. My networth then was in solid negative territory. On the bright side, my site is earning a little bit of money from adsense. I have to work on getting more passive type of income so I can just save more every month!
    Now it’s time to kick my nephew in the butt again for buying a truck with a $400/month payment, and probably not maxing any of his retirement options.

  18. Untemplater says

    I love this type of post. I didn’t do so hot in the first age group but I’ve been hustling to try and get caught up. It’s very motivating to have high returns and net worth goals. Takes sacrifice and sweat to build a big nest!

  19. Jamie V says

    I’m reading “Your Money Or Your Life” by Vicki Robin and Joe Dominguez and just finished the first step where I calculate my net worth for the first time in my life. At 27 years of age, I am at a net worth of -$11,100.00 and have over $23,000 of debt left to go (student loans mostly). My main 2014 goal is to get some of that debt lumped off because, as shown above, I’m really not where I should/want to be. It finally hit home that I need to be conscious about my money – got to start somewhere, right?

    • Financial Samurai says

      For sure Jamie. There’s no better time to start than right now. We can’t count on anybody to bail us out, and we will eventually tire from working long hours, hence the absolute need for savings and eventually getting your money to work for you.

      Good luck!

  20. Justin @ Root of Good says

    You have us pegged pretty well. For 3 out of the last 4 years we have experienced a 35% to 39% growth in our net worth (10% the other year out of the four). That’s how I retired at 33! Most of that growth came from excellent market returns (which are really outside of our control).

    At this point our net worth won’t grow as fast since new contributions to investments won’t be happening. Who knows, perhaps my Root of Good income will skyrocket and make the net worth continue to grow!

  21. Micro says

    The actual percent growth for me was around 1000% but that is simply because of where I ended up. I had a negative net worth and pushed into the positive right at the end of the year. Looking at your table, I feel the numbers are pretty accurate. I’m a little behind schedule right now but should be able to make it up through a high saving percentage as the years go on.

  22. Dividend Mantra says

    Sam,

    Good stuff. I can see how these NW targets are fairly reasonable if you start young and stick with it. I didn’t really start saving until I was almost 28 years old, so I’m way behind the curve here at 31. However, I’m confident at my pace that I’ll be squarely in your target range when I’m 40. Wish me luck! :)

    Best wishes.

  23. Ace says

    Sam,

    This is an excellent article!

    I’m obviously in a later life phase, so, I think 6 to 8% overall annual net worth growth would be satisfactory. Actually, my stock investments are up around 21% for 2013. I’m very happy with that!

    I’m actually more concerned with helping out my children as opposed to growing my personal net worth. This looks like a year where I purchase a third house. I don’t want my grandchildren growing up in an appartment, and houses are cheap right now!

  24. Charles@gettingarichlife says

    Sam,
    At this point our goal is growth of 20% annually. (That includes contributions) At that rate it will exceed our annual income earnings. I’ll hit financial independnce when my gains are greater than income without contributions.

    • Financial Samurai says

      A 20% annual growth is impressive for your age and assets. That’s a doubling of NW every 3.5 years. Hope you get there and don’t forget to take me out to a nice juicy steak dinner at Morimoto’s and then some cocktails at The Study next time I’m in Honolulu!

  25. Dear Debt says

    I’m 29 and have a huge negative net worth because of student loans :( I don’t even count my net worth b/c it’s so bad. I am putting away over 1k towards debt and once I am debt free I want to put that towards savings, retirements, etc. I’ll need to catch up.

    • Financial Samurai says

      Sorry to hear about that. But at least you have educational capital!

      Maybe it’s time to really highlight your negative net worth on your blog to get you in this intense phase of net worth creation. But maybe you are already there given you started a blog about reducing debt.

  26. Mike Hunt says

    Nice article.

    In 2013, my NW went up around 8%. It was taken down by a few items:

    1. Buying a larger residence and pumping money into some renovations and improvements.
    2. Birth of our first child.

    That being said, I also turned 40 in 2013 and have been a bit more conservative so I missed out on the huge stock market run for the most part. My overseas stock holdings didn’t do very well at all compare to the US market. Oh well.

    I am just above the top of the NW range for the 71+ age group so that’s also why I am a bit more conservative.

    Last year was also the year I was able to shed 40 -45 lbs (now am a trim 155 – 160 lbs on a 6’2″ frame) so that was a far bigger accomplishment than growing the NW a few more percentage points. I’ve already donated my entire old wardrobe to charity.

    Cheers,

    Mike

    • Financial Samurai says

      Howdy Mike, what percentage of your stock portfolio invests in Asian markets, and Thailand specifically?

      8% is pretty good and inline with the suggested growth rate for the NW range I have. What did well for you?

      • Mike Hunt says

        Unfortunately all my stock portfolio is in the Thai stock market, I also have some investments in early start up companies which are totally illiquid until there is a sale. My NW increase came from the old fashioned way- saving a ton of my income and getting a good bonus.

        That formula worked well for me in up and down markets so I’m sticking with it for the time being.

        -Mike

  27. archaicx says

    My age and networth are in your 31-35 bracket. I had a 51% gain in NW for 2013. I had ~45% for 2012. I was actually fretting over those numbers recently, but your charts and the comments here have put me more at ease.

      • archaicx says

        Sure. There wasn’t really a whole lot too it. It would have been more than 50% in 2013, but I had to pay for my wedding and honeymoon… missed out on a few points there, but I think I can live with that trade :)

        I’ll divide everything into contributions and gains. This was the first year that my gains passed my contributions, and I think that there is a good chance that will continue in the future (the snowball is rolling).

        Contributions represent 40% of my NW gains. These are contributions to both retirement and non-retirement accounts. Because I’m hoping for a relatively young retirement, more than half of these contributions are in post-tax dollars. I do still max out my 401k, but I’m considering cutting back since it has grown to represent about 50% of my portfolio.

        Gains represent the remaining 60%. The market went on a tear last year, and because I’m relatively aggressively invested in equities (~80% of my investments are in index ETFs like VTI, VB, and VUG) I caught a good chunk of that. The 20% of my investments that are not in index funds are in older bonds/CDs, stable dividend stocks (utility / energy mostly) with ~4% yields, or in an emergency fund.

        I would say that a year ago that 80-20 mix was probably closer to 90-10. I have a tendency to pile up cash in years where the market advances considerably. I’ll unload that cash when things get cheaper (or when I decide to finally bite the bullet and purchase a house).

        • Financial Samurai says

          Gotcha. I long for the day where my contributions can affect such a great percentage in net worth. Those were the fun times! Now my contributions are under 3% a year, and it’s very hard to make a difference. Hence the importance of allocation for me.

  28. Ryan says

    Is there a post on how you should save for retirement? For example, generate an emergency fund of XX amount, then max 401k, then Roth IRA (if allowed), etc etc

  29. Smurfette says

    Apologies if you have already written about this somewhere, but how are you defining “net worth?” For example, if you own a house with a sizable mortgage, are you including the value of the house and the mortgage? How would you suggest determining the value of the house? Should we just look at current market values today? Also, how would you suggest estimating the value of a pension within your current net worth? Would love to get your pov on this as my husband and I both have pensions via our jobs.
    Thanks.

      • Michael says

        Maybe I’m just bad at math, but what are we taking 4% of. Here is how my pension works with some sample numbers:

        Say I worked 5 years at my company. If I quit today when I’m say 60 years old they will pay me 10k per year for life. The “balance” of my pension today (say I’m 30 years old) could be 40k, but when I retire it could be worth perhaps 200k (estimated that I live till 80). Am I taking 4% of 200k or 40k?

        Another way to look at it is that when I retire, I’m promised 50% of my salary for life for the remainder of my life. Again, assume that happens at 60 and say you’re 30 or 40 today. Does the “balance” in the account today matter at all? Or perhaps the only thing that matters is how much 50% of my salary is?

          • Smurfette says

            Sorry Sam, i’m still confused on how to calculate the value of the pension.

            Say i make 100k currently, and stay at my current employer for the length of my career. And say that when i retire i’ll have 30 years of service, and my pension promises me 60% of my salary. So, assuming i have NO more raises between now and then (a conservative approach), 60% of 100k salary is $60k yearly income from the pension.

            If I understand you correctly, you said to take 4% of that….. would be $2400… and that to my current net worth?
            Seems like a very small amount. Almost nothing! am i calculating it wrong?
            thanks in advance for your response.

            • Ace says

              Smurfette,

              I can’t resist jumping into this thread…. $60,000/year is an excellent pension. You are very fortunate!

              If you go through a divorce, you will find out how really difficult it is to value a pension. Most financial planners look at the what it would cost to purchase an annuity with comparable cash flows.

              But for a ball park estimate. Divide the annual benefit by 4% which would give you a future value of $1.5 million (lump sum). The 4% rate is typically considered a safe annual withdrawal rate from your retirement plan. If you really like math you could discount this $1.5 million back to today’s dollars. $1.5 million/(1.04)^30= $462,478 with assumption that you have to wait another 30 years to collect.

              So basically, a lump sum investment of $462,478 with a 4% rate of return will give you $1.5million 30 years from now.

              Hope that helps!

            • Smurfette says

              Now I feel like a real idiot… I was multiplying by 4% instead of DIVIDING! no wonder it was making no sense to me! Thank you Ace for jumping in, much appreciated!

              And the $60k/year pension is actually my husbands, not mine – but yes, i guess he is really fortunate, and I am too :) I do have a pension as well from a previous employer, but it’s much smaller!

              One big caveat, the $60k/year is only assuming he stays with his employer until retirement. If he were to switch jobs for example, and thus have less than 30 years of service with this employer, the pension would be much smaller. We’re going to look at the what the pension would pay assuming he quit today (with 6 years of service), and use that number to divide by the 4% to add to our net worth. I’d think that is the correct way to do it as we can’t just assume he’ll spend 30 years at this employer.

              Thanks again for the response!

  30. Andrew says

    Your blog continues to inspire and challenge… How does this chart change if any for an employee with a pension? I am 28 years old and due to retire at 52 with 90% of my highest paid year. My wife and I live in a high cost city in CA and have 25k in a 457 and 15k in cash but other than that we are having a challenging time pushing our savings further with our mortgage, child etc. Thoughts?

    Andrew

    • Financial Samurai says

      Hi Andrew,

      Having a pension is the golden goose. But pension plans might change in 24 years, so be careful not to overly rely on it and not save.

      Take your estimated pension annual income divide it by 4% (rough estimate) to get what it’s worth.

  31. Spencer says

    Since we and my wife are in our twenties we are definitely in the “rocket ship” growth phase. Our net worth was up over 300% this year. Pretty easy with a few bonuses, pay raises, an aggressive savings rate, and starting from so little. I’m planning on a 100-150% increase next year, depending on how the stock market performs. Maybe we’ll do even better if my wife’s start up gets the big win :)

  32. Retireby30s says

    Well compared to your results by 30 I’m not EVEN CLOSE!

    It is very hard IMHO to get to 50% growth when you’re in your late 20′s… maybe I am doing something wrong here.

    General states: Net worth at ~$250K, Gross income ~$175K (trying to get that promotion for a 20% bump!) and single….

    With that it’s quite hard to get to 50% growth. Even with aggressive savings say 100K is saved (net of taxes that’s about 65K) even if the market moves 10%… thats 90K… That is only a 36% move! As I said not even close even with aggressive assumptions!

    Also not too comfortable having a near 80% securities exposure so I got no idea how you’re getting 50% returns! Maybe I gotta read a few new books.

    • Financial Samurai says

      Howdy Mate,

      With a net worth of $250,000.. you’re on the border, and I’ve provided a 25%-50% range for that net worth amount. So your 36% up is right smack in between.

      Depending how old late 20′s is, you’re doing very well based on my estimates. $250,000 is the top of the 18-30 range.

      I wouldn’t get too caught up about hitting the exact numbers. Remember to think risk and reward together.

      • Retireby30s says

        Well i guess the issue is how to maintain call it 8% investment growth without going crazy.

        It’s actually mentally taxing at this point, your net worth moves by 4 figures on a daily basis and its hard to see all the small reinvestments you make from a measly paycheck here and there.

        Think that might actually be a good post topic!

        Also realized you asked me how I found the blog, I found it when looking around for information on Wall Street layoffs.

  33. no says

    Having no children and no spousal dependent (we have our own savings, expenses, property, and do not rely on each other for financial support), I’m almost 37 and progressing as if I were in my 20s – when I did not have the opportunity to do so. I certainly am not at the half million mark as advised in here. In fact, nowhere near that.

    I’ve got a home of just over $200k with a low mortgage and a 4.85% rate (I bought a home that was half what I could afford so I’d have plenty of flexibility). My monthly expenses for utilities and property tax and food and everything else is around $2500. I earn $100k-$165k per year (it varies, but stays between there). I have $106k in a 401k and $11k in a traditional IRA (earned too much the last couple years to contribute to a Roth).

    I would be much farther ahead than this, except I’ve also had to assist some immediate family over the last fifteen years and I’ve also spent a lot of money renovating this home in the last four years I’ve lived here. I’m not considering this property an investment, so I have spent nearly $100k to make it a place I can enjoy and be comfortable in for the next 30 years. Upgraded the electrical panel, improved electrical safety (originally aluminum wiring). Gutted two floors and updated them. New windows throughout the house instead of the drafty cold rattly ones that came with it. A new top of the line evaporative cooler, sealing and insulating the entire house, built a custom bathroom with a spa tub (as an ex athlete and now an aging engineer, this has been a tremendous investment for my well-being). Even a new boiler and partial replacement of the hydronic baseboard heating units in two of the zones. Also renovated the 30 year old tired landscaping, adding security system, and so on. Oh, and had to replace a broken water main (ouch – costly!) this past winter.

    It has been expensive, but it should leave me with fewer expenses over the rest of my life in this home, instead of things popping up every few months. At this point, the only significant expense I plan to have with my home is the installation of a new sprinkler system to replace the dead one in our lawn that isn’t very efficiently planned-out for optimum coverage. That’ll be a few grand. After that… it’s all cosmetic… and probably nothing I’ll look at touching for about five years.

    I plan to keep maxing my 401k, my standard IRAs, putting a big chunk into a personal account with mostly S&P mirroring passive indexes and a little P2P to offset the lousy CD options out there right now.

    I’d love to have the time to focus on individual stock picking, but it’s a choice between making a decent income near or above six figures and not having the plentiful time to afford constant portfolio babysitting or going for funds and indexes.

    I wish I had started fifteen years earlier, but we’re at where we’re at.

    • Lady says

      With a $100-$160,000 a year income and your financial situation, I’d think you’d be able to save 50% of your income, invest and catch up in no time!

  34. Jack @ Enwealthen says

    Thought-provoking, as usual!

    While a nice framework, I disagree with the underlying assumptions that we’re all walking the same decade-banded path towards retirement. Depending on the choices you make in your 20s and 30s, or events outside your control, you may be way ahead of the curve, like Sam, or behind it, like most of the country.

    What matters most is knowing your destination, even if you’re not sure how you’re going to get there yet. I’m on the way to a safe, secure, and fun retirement.

    Of course, getting there is half the fun.

  35. Sunil says

    Hi Sam
    Great analysis as usual. I am 41 and my wife is 37 and our total net worth is around 1.2 mil. I hope we made the cut. The concern that I have is most of our net worth is in real estate. We also live in bay area and bought our primary residence plus 2 investment condos between 2010 to 2012. I had also purchased some inexpensive properties in India 10 years back which are worth 200k that I have included in my net worth. Can you include international real estate while calculating net worth? What about physical gold? what about money in 529 plan? Our 401k is really low for our age.. 160k combined. I am not sure if we will ever be able to catch up. Both of us have started making maximum contribution plus my wife gets a generous 10% match. We are not eligible for IRA due to our income, so our IRA is less than 10k. Also we find it hard to save 50% of our income (300k combined) for two reasons. One is due to our sons private school. We bought our house in a good school area but we have continued with the private school because we are somewhat skeptical about the public school in the bay area (and california in general. California has the 49th best school system in the country lol). Second one is vacation. We take expensive vacations to europe/ carribean at least once a year (sometimes twice). But we are very frugal with everything else. I am still using my toyota corolla that I bought after graduation (has over 250k miles). Always buy clothes on sale or discount stores such as Ross. After taxes and everything else we are able to save about 35% of income…

  36. Skeptical says

    I’m very skeptical of your target return rates. 50-100% in your 20s? While the market has been good the past year, more often than not you will be very disappointed if this is your expectation. And if you go about your investments trying to achieve this rate of return, it will often blow up in your face.

    You yourself note that the average growth for the S&P 500, which represents the majority of the US economy, is 8%. Do you really believe that anyone should target and expect 500%-1100% better than this?

      • Skeptical says

        OK, so we’re not talking about rate of return then. But still, seems very high.

        Sure, it’s easy enough the first few years, but how long do you expect someone to be able to keep doubling their money? In your example, after five years you’ll have saved $160K. At this point, do you expect someone to save another $160K in a year? Even if your salary TRIPLES in five years from $50K/yr to $150K/yr, you would still fall short even if you save your entire annual salary.

        Even at the low end of the numbers you suggest, it’s unrealistic. Assuming you start from just $5,000, the minimum suggested rate of growth would set you up with $30 Million at 70 (which, as Sally points out, doesn’t seem to keep track with the suggested net worth you’ve listed, but that’s what the math comes out to).

        Let’s take a snapshot at 30. Using your minimum figures again, a 30 year old would be expected to increase his net worth from about $650K to about $975K. Even assuming an overly aggressive 10% rate of return on investments, how is he supposed to save $225K in a single year? The vast majority of 30 year olds are making significantly less then $225K.

        If you do the math, not only are the numbers unrealistic, but they aren’t even consistent with the rest of the table.

        • Financial Samurai says

          Not sure if you are reading the charts right. I have a suggested net worth of $250,000 at the high end for someone 30. At 31 I’m suggesting a 25%-50% increase in net worth, or $50,000 – $125,000.

          I think it’s great you are using a $650K net worth for 30, but that’s outside the scope of my chart.

          At $650,000, the age range is 41-55 and the growth rate is 10-15%. Do you not see these figures?

          Can you share with me your age and net worth? I think it’s really important you develop a more positive mindset about your money because your finding lots of excuses why you can’t do something. Find some excuses why you CAN do it.

          • Skeptical says

            Did you read my post? I am pointing out the internal inconsistency of the charts, which is exactly why it seems as though I haven’t read the figures right.

            I’m 22 with a net worth of about $25K. Using myself as an example, I get the following expected net worth numbers if I use the minimum growth rate in your chart.

            Age, Growth Rate, Net Worth ($K)
            22, 50%, $25.00
            23, 50%, $37.50
            24, 50%, $56.25
            25, 50%, $84.38
            26, 50%, $126.56
            27, 50%, $189.84
            28, 50%, $284.77
            29, 50%, $427.15
            30, 50%, $640.72
            31, 25%, $961.08
            32, 25%, $1,201.35
            33, 25%, $1,501.69
            34, 25%, $1,877.12
            35, 25%, $2,346.40
            36, 10%, $2,933.00
            37, 10%, $3,226.30
            38, 10%, $3,548.92
            39, 10%, $3,903.82
            40, 10%, $4,294.20
            41, 10%, $4,723.62
            42, 10%, $5,195.98
            43, 10%, $5,715.58
            44, 10%, $6,287.14
            45, 10%, $6,915.85
            46, 10%, $7,607.44
            47, 10%, $8,368.18
            48, 10%, $9,205.00
            49, 10%, $10,125.50
            50, 10%, $11,138.05
            51, 10%, $12,251.85
            52, 10%, $13,477.04
            53, 10%, $14,824.74
            54, 10%, $16,307.21
            55, 10%, $17,937.93
            56, 3%, $19,731.73
            57, 3%, $20,323.68
            58, 3%, $20,933.39
            59, 3%, $21,561.39
            60, 3%, $22,208.23
            61, 3%, $22,874.48
            62, 3%, $23,560.71
            63, 3%, $24,267.54
            64, 3%, $24,995.56
            65, 3%, $25,745.43
            66, 3%, $26,517.79
            67, 3%, $27,313.33
            68, 3%, $28,132.73
            69, 3%, $28,976.71
            70, 3%, $29,846.01

            As you can clearly see, if you do the math these numbers do not match with the suggested net worth figures listed in your chart. The chart is not even internally consistent! This type of analysis is why I believe the growth rates listed in your table to be unrealistic (while frankly I believe the net worth amounts to be about right, if a little low).

            • Financial Samurai says

              Thank you for telling me you are 22. I understand your position much better now.

              My chart is a guide for various snapshots in time. Life is not linear. Things happen all the time. Definitely revisit this post after 3,5, and 10 years and I think you’ll be able to relate a little better.

              One important tip I have for you: Try and listen and be flexible to listening to advice to those who’ve been there. It’ll help you get much farther. Or don’t. All is good.

            • Jerry says

              I’d love to learn about personal finance from a poor 22 year old who has never experienced life and thinks he knows everything.

              Let’s toss another one in the bin for the government to support 35 years from now.

          • Joe says

            Sam, why are you even bothering responding to this know it all 22 year old guy who offers no solutions and just whines?

            He has no experience, doesn’t listen, and will probably end up with much less than what you’ve had in your charts because he’s irreverent. Chances are high he didn’t go to a good school and is working some dead end job.

            Don’t waste your time!

            • Harsh says

              Joe and Jerry, I think both of you need to take a long look in the mirror before you make rash remarks. In general, yes a 22 year old may not have as many life experiences as someone older…… or they may have 10x the experiences. Age doesn’t make you mature or imature, the person you are does. You’ll notice that as you have been attacking Skeptical, the only remarks they have left are in regards to their original question to Sam while both of you felt the need to attack them on a personal level. For both of you to assume they will be poor or went to a bad school working a dead end job really speaks volumes about your character. Does it make you feel better about yourself to attack someone else while sitting at your computer? I may be mistaken, but I thought the point of this site/blog was to share ones personal experiences to try and help others, not attack and judge someone that you disagree with. I for one am very dissapointed that this had to turn into some sort of Yahoo type thread.

  37. Sally says

    I’m confused – why don’t your net growth %’s keep track with the suggested net worth numbers in the table?

    For example, the low end for net worth at age 31 is 250K. At 25% (the minimum target annual rate of growth you list) for five years, you would expect 750K by age 36, but that’s more than the high end of the suggested net worth for 36-40. And that’s not counting additional savings.

    In fact, if I keep this up through age 70, using the minimum annual rate of growth in your suggested ranges, I would expect 13 million dollars by age 70!

    I must be missing something? Are there things like mortgages being accounted for?

    • Skeptical says

      Yeah, it doesn’t make sense to me either. People aiming for these numbers are setting themselves up for disappointment. It gets even more extreme if you start from the beginning of the years listed on the table – see my comment above.

    • Financial Samurai says

      You make a great observation Sally. The reason is: life happens and things get in the way. I didn’t want to make the suggested net worth range so out of reach that people get discouraged like they have been with my previous posts about net worth. But even with these figures, I’ll have people like “Skeptical” push back probably because s/he is not close to these figures.

      People will see these charts as snapshots in time in their life. If one was to see this post and chart since college, I think there’s a much better chance of getting to that 13 million you’ve calculated at age 70.

      • Skeptical says

        Again, no need to be condescending.

        I don’t “push back” because I am nowhere close to these figures. I “push back” because by using your figures I get led to results that are far too optimistic, which makes me question the figures.

        As I said before, I would love to see a more accurate analysis that takes these life events into account. I believe that is much more useful than simply saying “everyone between 18 and 30 should be increasing their net worth by 50% per year.” Don’t you think so?

        • Financial Samurai says

          It’s understandable to be frustrated if you’re not within the range. I get it. To explain “life happens,” the best way is to spend some time reading various articles on this blog.

          Actually, this is the best article to read to help address your frustrations, “Explaining Why The The Average 401(k) Balance Is So Low“.

          Also, you’re welcome to write a post for me sharing your thoughts on what should be the suggest net worth growth targets, and net worth range by age.

          • Skeptical says

            Again, what’s with the condescending attitude?

            I’m not frustrated that I’m not in the range. I’m sure you wouldn’t say that a 22 year old with $25K is not on a reasonable path, and neither would I.

            I’m frustrated because because your figures lack an internal consistency.

            • Sally says

              Please don’t let a few bad apples ruin this site for you. Yes, the numbers are high, but if you work hard your dreams will come true!

            • Financial Samurai says

              BTW, someone impersonated me on some previous comments you might have read. They have been deleted. I even wrote an entire post on it at Yakezie.com. Check it out.

              Anyhoo, one of the biggest things in life is that it’s not linear. Things happen all the time. Hope you were able to read the post on explaining why 401(k)s are so low.

              My post tries to be dynamic and provide ranges by net worth, growth, and age to help as many as people as possible.

              Again, I WELCOME your viewpoint on net worth, growth etc if you can write a post for me on what you think is the right way.

        • Joe says

          Dude, you are really annoying and offering nothing except complaints. Just accept the fact that you will not get very far in life because your attitude will make sure of it.

          • Harsh says

            Whoa, hold on there everybody. Skeptical provided a valid analysis year by year based on the values provided in the original chart. I understand that these are guidelines, but good god attacking him for providing a valid response, whose the real child here? Skeptical cleary pointed out that they felt the NW range itself was acceptable, he only pointed out that according to the math provided there is an inconsistency. I don’t know what is wrong with this Joe character, but reread your response and realize your nothing but rude. Your saying someone who takes it upon themselves to analyze a scenario and comes up with a discrepancy is annoying and offering nothing? I would completely disagree with you and say your resposne makes you sound like a child half the age of Skeptical. I’m sorry if you find my analysis of your child like behavior annoying and comes off as complaining, I guess I will never get very far in life due to my attitue.

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