The Average Net Worth For The Above Average Person

Average Net WorthEverything is relative when it comes to money.  If we all earn $1 million dollars a year and have $5 million in the bank at the age of 40, none of us are very wealthy given all our costs (housing, food, transportation, vacations) will be priced at levels that squeeze us to the very end.  As such, we must first get an idea of what the real average net worth is in our respective countries, and then figure out the average net worth of the above average person!

According to CNN Money 2014, the average net worth for the following ages are: $9,000 for ages 25-34,  $52,000 for ages 35-44, $100,000 for ages 45-54, $180,000 for ages 55-64, and $232,000+ for 65+. Seems very low, but that’s because we use averages and a large age range.

The Above Average Person is loosely defined as:

1) A person who went to college and believes that grades do matter.

2) Does not spend more than they make because that would be irrational.

3) Saves for the future because they realize at some point they no longer are willing or able to work.

4) Largely depends on themselves, as opposed to mom and dad or the government.

5) Takes responsibility for their own actions when things go wrong and learns from the situation to make things better.

6) Has an open mind and is willing to look at the merits of both sides of an argument.

7) Welcomes constructive criticism and is not overly sensitive from friends, loved ones, and strangers in order to keep improving.

8) Has a healthy amount of self-esteem to be able to lead change and believe in themselves.

9) Understands the mental to physical connection in everything we do so that that a healthy mind corresponds with a healthy body.

10) Enjoys empowering themselves through learning, whether it be through books, personal finance blogs, magazines, seminars, continuing education and so forth.

11) Has little-to-no student loan debt due to scholarships and part-time work.

Now that we have a rough definition of what “above average” means, we can take a look at the tables I’ve constructed based on the tens of thousands of past comments by you and posts I’ve written to highlight the average net worth of the above average person.

THE ABOVE AVERAGE NET WORTH DECONSTRUCTED

First, we must highlight what the average tax-deferred retirement savings plan is for those in America. We’ll focus on the simple 401K system we have here where one can contribute $17,500 of their pre-tax income every year as of 2014.

This chart can be used as a rough estimate for those with the RRSP plan in Canada, and retirement plans in Europe and Australia as well. In fact, any country that has any sort of tax-deferred retirement plan and social safety net program for retirement that has a GDP/capita of $30,000 or more can use the below chart as an aspirational guide. Remember, we are talking about the “above average person”.

FINANCIAL SAMURAI TAX DEFERRED (401K)  SAVINGS GUIDE

Age Years Worked Low End High End
22 0 $0 $0
23 1 $8,000 $17,000
24 2 $25,000 $35,000
25 3 $42,000 $60,000
30 8 $127,000 $182,000
35 13 $215,000 $331,000
40 18 $300,000 $521,000
45 23 $383,000 $764,000
50 28 $468,000 $1,075,000
55 33 $553,000 $1,470,000
60 38 $638,000 $1,974,000
65 43 $723,000 $2,618,000

The assumption here is that the above average person is able to start maxing out their tax-deferred retirement plan every year after the second full year of work, and continue on without fail until 65.  The low and high end account for 0% to a relatively conservative 5% constant rate of return.  Of course you can lose money and make much more if you are good and lucky.

This chart does not take into consideration any after-tax savings post 401K contribution.  To understand what the average after-tax savings rate is post tax-deferred retirement contribution is a gargantuan task because there are too many assumptions that are debatable eg. income and after-tax savings rate post maximum pre-tax retirement contributions.  That said, I’ll offer a base case guide anyway.

FINANCIAL SAMURAI AFTER-TAX SAVINGS GUIDE

Age Years Worked Low End High End
22 0 $0 $0
23 1 $5,000 $10,000
24 2 $10,000 $20,000
25 3 $15,000 $35,000
30 8 $50,000 $85,000
35 13 $100,000 $130,000
40 18 $125,000 $200,000
45 23 $150,000 $250,000
50 28 $175,000 $300,000
55 33 $200,000 $350,000
60 38 $225,000 $400,000
65 43 $250,000 $500,000

The above chart assumes on the low end that one saves about $5,000 a year in after-tax income and around $10,000-$15,000 a year in after-tax income on the high-end after maxing out their tax-deferred retirement vehicle. I’ve tried to keep things as simple as possible, assuming no inflation and no investment returns. I also believe saving $5,000-$15,000 a year in after-tax income is very realistic for the above average person, and probably very easy for many who earn more than $85,000 per person. Finally, the chart should show you the power of consistency.

THE IMPORTANCE OF REAL ESTATE

A 2010 study showed that the average net worth of a homeowner is roughly $200,000, or 40X greater than the average renter’s net worth of $5,000. We can debate the merits of this study (done by a real estate association of course) all day long (demographic sampling, housing price changes, etc), but the point is, “above average” people generally all own homes and are wealthier, be it 2X wealthier or 40X wealthier than the average renter.

The return on rent is always -100%. You get a place to live and that’s that. There is never a positive return on an asset after a month, or 30 years of renting. A renter cannot pass on her paid off house to her kids or grandchildren. There is no asset accumulation at all.  There is a reason why some 97% of millionaires are property owners.

The value of real estate varies across all the land and the world. It is very hard to make an assumption of what should be inputted as a result. According to the US Census bureau, the median home price in America is $221,800 while the average home price is $272,900. You can’t get anything livable in San Francisco, New York City, Los Angeles, and maybe even Washington DC and Boston for $250,000. But, you sure can in the mid west for $250,000.

Hence, let’s construct an equity value chart of something based on a range of $250,000-$500,000, with the assumption that upon retirement, you have your house paid off and can attribute this amount into your net worth, or the capitalized value of all rents you would pay if you did not own.

FINANCIAL SAMURAI HOME EQUITY PROGRESS GUIDE

Age Years Owned Equity Build Progress (Low) Equity Build Progress (High)
28 1 $3,500 $7,500
30 3 $12,000 $23,000
35 5 $20,000 $40,000
40 10 $45,000 $95,000
45 15 $85,000 $150,000
50 20 $110,000 $215,000
55 25 $150,000 $300,000
60 30 $190,000 $390,000
65 35 $250,000 $500,000
Total Home Equity $250,000 $500,000

I assume that the above average person buys a $250,000-$500,000 piece of property at 27. By the time they turn 28, they will have owned the property for 1 year and have paid down $3,500-$7,500 in principal on a $250,000-$400,000 loan. I conservatively assume a $250,000 no money down loan for the low end house, even though after 5 years of working, the low-end above average person should have around $25,000-$30,000 saved up in cash based on the after-tax savings charts above.

By the time a 27 year old pays off his or her mortgage in 30 years, s/he will be 57 years old with a place to live rent from for the rest of his/her life. That is the true value of the property, the rent saved for the remainder of the owner’s life. It can be calculated as the present value of those future rental payments, or simply the market value of the home. I assume zero price appreciation on the home to keep things conservative and no extra payments to accelerate the payoff either.

THE X FACTOR

So far, we’ve touched upon pre-tax savings, after-tax savings, investment returns of 0 for those savings to remain conservative, and real estate. You need to spend less than you earn for that inevitable day you no longer have an income. You also need to live somewhere, hence, you should own your property if you know you will be there for much longer than 5-10 years.

There’s something missing in all of this, and that something is what I call the X Factor. Above average people seem to always be thinking of new ways to build wealth.  There is an optimism about them that no matter what happens, they can always find ways to make more money. It’s hard to quantify what that X Factor is for the average above average person, but it’s there somehow through music, writing, athletics, communication, entrepreneurship, hustling, and so much more.

The great thing about savings and real estate is that the process is highly automatic.  If you implement the plan and wake up 10 years later, you will inevitably be worth much more provided you keep your job and your home.  Given savings and building equity in your home over the next several decades is largely automatic, the X Factor comes out because you have so much more free time to do something else!

THE AVERAGE NET WORTH OF THE ABOVE AVERAGE PERSON

I have gone ahead and averaged the averages for pre-tax savings, post-tax savings, and real estate equity progress in the spreadsheet below. The pre and post tax savings can be invested however you see fit and is a topic of another post. Another thing to note is taxation, given pre-tax savings have to eventually be withdrawn and taxed. Again, these are rough estimates to give you an idea of the average net worth of the above average person.

THE AVERAGE NET WORTH OF THE ABOVE AVERAGE PERSON
Age Yrs Worked Avg Pre-Tax Savings Avg Post-Tax Savings Avg Property Equity Avg Total NW
22 0 $ - $ - $ - $ -
23 1 $ 12,500 $ 7,500 $ - $ 20,000
24 2 $ 30,000 $ 15,000 $ - $ 45,000
25 3 $ 45,000 $ 25,000 $ - $ 70,000
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 2014

There you have it! Based on my assumptions above, the average net worth of the above average 30 year old is around $240,000. By the time this person is 40, his/her net worth should climb to around $650,000 and all the way up to around $2,000,000 million by the age of 60.

Of course some of you above average Financial Samurai readers will have a total net worth much higher than the chart. But then, I’d have to write another post entitled, “The Average Net Worth Of Financial Rockstars!”

Note: The figures in this post are per person, not per couple. Here is the average net worth for the above average married couple.

Recommended Actions For Increasing Your Net Worth

* Manage Your Finances In One Place: The best way to build wealth is to get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts on their Dashboard so you can see where you can 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.

One of their best tools is the 401K Fee Analyzer which has helped me save over $1,700 in annual portfolio fees I had no idea I was paying. You just click on the Investment Tab and run your portfolio through their fee analyzer with one click of the button. Their Investment Checkup tool is also great because it graphically shows whether your investment portfolios are property allocated based on your risk profile. There is no better free online tool that has helped me stay on top of my finances more than Personal Capital. It’s important to aggregate all your accounts to get an entire view of your net worth profile. It only takes a minute to sign up.

* Check Your Credit Score: Check your credit score at least once a year given the risk of identity theft as well as the importance of having a good credit score when borrowing money, apply for a mortgage, and applying for a job. For over a year, I thought I had a 790ish credit score and was fine, until my mortgage refinance bank on day 80 of my refinance told me they could not go through due to a $8 late payment by my tenants from two years ago. My credit score was hit by 110 points to 680 and I could not get the lowest rate. I had to spend an extra 10 days fixing my score by contacting the utility company to write a “Clear Credit Letter” to get the bank to follow through. Check your credit score for free here at GoFreeCredit.com and protect yourself.

Updated 3/31/2014.

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. says

    I am 33 years old. I’ve working at Samsung for 9yrs so far. My cash net worth is $6.6M (USD) and $245,000 in Euros since I travel a lot. I don’t have 401K but I do have a Swiss bank account. I usually keep $2.4 Million dollar in my checking account (Capital One) My annual salary is around$546,000 after taxes. My goal is to save at least $56M until I became age of 65. I still feel like I am making less money than most of people, cause Most of my colleague saved more than $35M (USD) not include their property just pure cash.

  2. Brian says

    Man, after reading all this I feel poor. I’m 31, and have been working for 8.5 years. My salary as an engineer was low for several years which finally drove me to get another job and move from my hometown. I earned $92k last year, which is pretty good for the area of the county I live in.

    I have $30k in checking, $86k in 401k (I save 15% and get a company match of 4.5%), I have about $18k in home equity on my $158k house which is financed at 4%. I have three several year old vehicles. I do owe $3k on one but the interest rate is 1.99% and I owe $12k in student loans but the interest rate is 1.625%. Any time I can borrow at less than inflation I’m going to do it.

    I recently got married after a very long engagement. My wife does not work and probably never will. I think this is a huge opportunity cost but health issues prohibit her from working.

    Being married has changed my retirement strategy 180 degrees; before I was plowing all my money into tax deferred accounts, but now our marginal rate is 15% so I am going to switch contributions to my Roth 401k.

    We don’t have big expectations – if I live in this house forever I don’t really care. If I never drive a new car, I don’t care. If in order to retire I have to sell this house and buy a decent mobile home out in the country, I don’t really care. What I am most worried about is what will happen with Medicare or how to pay for health insurance if I retire before 65. It’s worrisome so much that I am considering trying to get a Federal civil service job because they still offer retiree health benefits.

  3. David says

    Very cool website. I’m thinking of checking out Personal Capital, just want to make sure its safe!

    I’m in the above average pool. I own a business, eventually want to be able to live off passive income, don’t think I’m too far off, but right now not trying to really grow business much, more concerned with quality of life. Right now I’m single and 34. Cash of about $90,000. IRA and brokerage accounts of $115,000. Also have 3 investment properties, where I generate about $12,000 a year in passive income (while leaving plenty for repairs and other expenses). Have a primary residence with worth about $225,000, with a mortgage of $160,000. I have no CC or auto debt. Any ideas on how to get more passive income? I like real estate but looking for other options also.

    • says

      Welcome to my website! Don’t forget to subscribe.

      Personal Capital is safe. The CTO founded the encryption technology used by many of the big banks online now. After 1.5 years using the free Dashboard, I decided to take a part-time consulting job there for 3 months in 2014. I’ve met over 50 people there and talk to the CEO every week.

      The other way for passive income is simply dividend stocks or munis. Just got to pick the ones appropriate for your risk tolerance.

      Sam

  4. Jay says

    Very nice website, I on above average on all the categories except the pre-tax 401k, me and my wife started late on 401k savings.

    I’m 39 and my wife is 34 and our combined 401k is just over 450k (250 for me), our savings + investment (stocks) is 560k. Total net worth is 3.5M, plus 450k debt (properties). Our income on 2013 was just over 500k (still crunching final # for 2013 tax). Both of us have full time jobs with a online business.

    My experience is setting a realistic short term goals and long term goals. And when if I met my ST goals within certain time period, I increased my next set of ST goals.

    I use mint.com to monitor all my financial data and watch my budget and cash flow.

    How is mint.com compared to Personal Capital?

    My goal is to have net worth of 10MM at the age 50.

    • says

      Mint is good for basic budgeting. Personal Capital is good for cash flow analysis and portfolio analysis (investing). I’d give Personal Capital a shot and at least run your investment portfolios through its free Investment Checkup feature.

      A $10 million net worth would be great and a worthwhile goal. You can earn $300,000 a year from interest alone and live a pretty good life. Good luck to you!

      • Jay says

        I’ll definitely try out personal capital, I was tracking my finances with excel spreadsheet since 2007, and found mint last year. I bought quickbooks for my business but hated it.

  5. Sig Sharma says

    29 yo, just stumbled on your website. This is awesome! I rarely find people to openly discuss finances with in my friends/co-workers.

    Have about $90k in 401k (started maxing it out 3 years ago), 110k in cash + stocks (mostly cash) and 125k in home equity. So I would say I’m on track with a net worth of $325k. Got married 3 years ago and wife and I maintain separate finances. She has about 200k in cash & $70k in 401k (32yo) so nw of about 270k. I’m encouraging her to move more of her cash into inflation proof investments like index funds/ETFs but havent had much luck so far.

    I’m so excited to discover this website that I think its blocking me for having too many comments under moderation ;)

  6. David says

    Reading all the comments of all these rich people is really depressing. I am 28 years old and am in a transition phase of my life. I am bringing in about $2200/month in unemployment/rental income yet have a mortgage that is a couple hundred dollars shy of that. I’m hoping to find steady employment soon to get back on track and not fall into foreclosure. I started working at 23 and my net worth is currently around $180K. I have about $100K in retirement and investments, $20K in savings, and about $60K in home equity. I thought I was doing pretty well but some people my age already have 2-3 times this amount saved. That’s amazing. I initially was very bullish about the stock market in 2009; however, after being up about 30% in one year, I got very shy and pulled almost everything out. I did but a house but after a year it is only up about 5% from what I bought it for. Definitely an economically challenging time for me but I hope to find the light soon and start saving again. Good luck to everyone!

  7. MJ says

    hi guys, glad i found this website.

    i am like reading others experiences especially ones which show me where i am behind. i need to up my savings after putting 105k in an investment in 2012. though i have started maxing out my 401k recently i also am avid real-estate investor and feel like this is where my wealth will really stand out. i have an estimated 360k in equity over two properties which net about 40k in income. i think i can improve the performance to get that number up substantially. i am hoping to surpass my income with passive income in 5 yrs.

  8. J says

    Sam, glad I found your site. I did a google search for “45 year old average net worth”. I get kind of depressed reading some of the posts above for someone my age (45). I only make 100K, sometimes a bit more with bonuses. I’m married with a kid and we only have one income now. I am on track only because I’ve inherited some money.

    Retirement accounts $620K, Cash and stocks $259K, Real Estate $570K equity. That puts my net worth about $1.4M

    I’ve been using SigFig and Mint, but am interested in Personal Capital. I will give that a try.

    Thanks!

  9. Lindsey says

    My main problem with this is the assumption of no student loan debt for the “above average” person. This seems more like the “had rich parents” person. I had a half tuition scholarship and worked part-time throughout college. However, my part-time wages only covered my housing and food – and that was a huge stretch that included additional money saved up over summers and in high school. Parents also contributed a lot towards college, but I graduated with around $35,000 in student loans. Add my car loan on top of that, and my net worth after graduating started out at a little below -40,000. I would guess that this is fairly normal.

    Of course, there are other variables at play. Cost of living in the city where you attended college, for one thing, as well as whether or not you attended a state school or a private university. However, even for the above average person, I don’t think starting out at 0 net worth is average.

  10. Alex says

    Very well written paper with solid math & statistics. Thanks for posting it. I will be sending this on to many others…

  11. Brian says

    This is sort of a funny article in my eyes. There are so many variables. 1. How many 26, 27 year olds are maxing out their 401K’s when they have Student Loans, Rent or a mortgage to pay, and then factor in babies? None that I know of. I am 35 and am STILL unable to max my 401k.

    Also, the chart on homeownership and equity is laughable. Has the author not seen the housing market decline? My house which I bought for 250k in 2007, now 7 years later it worth a Paltry 200k. And those numbers dont add up. I refinanced once and I still owe 240k.

    I have a college degree, never been unemployed, and neither has my wife, who has 2 Masters Degrees. Low end on home equity is in the negatives. High end equity right now would maybe be your low end numbers. This is at least with what I see from myself, and my 35 year old friends. Unless you want to factor the one friend who is a 1%’er. Then yes, your assumptions would be right, except that at 35, he is worth $20 Million.

    • says

      Maybe we just have different friends? I would say 80% of the 26-27 year olds I knew growing up and those I know today are maxing out their 401k.

      I am also well aware of a very large nationwide housing recovery since 2012.

      Where do you live and how much do you and your wife make?

  12. George Goetz says

    I would not count home equity as part of net worth unless it is rental property that generates an income.

  13. Brillo says

    I love places like this, and the comments that come in. People love to brag and spin tall tales in the comment sections. My fav might be the first guy (Jim?) This guy goes on about his millions, but writes like a 3rd grade dropout. LOL.

  14. hawaiilife says

    Interesting website. Good to hear where people stand.
    Im 24, currently around 100k net worth all in cash besides mode of transportation (paid for)
    no debts whatsoever, looking to put some money in an index fund. thinking vangaurd.
    Any suggestions for investments to offset inflation?

  15. AB says

    This is a great site.
    I’m a 50 year old, recent divorcee, who is a low wage earner to an ex who is a high wage earner.

    Even after the divorce settlement, I am way behind, especially since I was out of the work force for almost 10 years; and am basically starting my career over.

    At least this gives me a starting point to gauge my progress.

    Thanks,

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