Everybody should have a net worth target to shoot for by age, work experience, and income. Targets will help you stick to your financial plan and motivate you to do more if you’re falling behind.
Too many people wake up 10 years later and wonder where all their money went. If only they could have a net worth guide they could print out and stick on their refrigerator to keep them on track.
Below is my net worth target guide to shoot for. The targets are based on a multiple of gross income, regardless of your savings rate. Obviously, the more you save, the more conservative the target net worth multiples will be. But it’s always better to end up with too much money, than too little since there is no rewind button in life.
Net Worth Targets By Age, Years Worked, Income
These target figures are for those who:
- Take action rather than complain about an unfair system
- Max out their 401k and IRA every year
- Save an additional 20% or more after taxes and 401k/IRA contribution
- Take calculated risks through investments in various asset classes
- Build multiple streams of active and passive income
- Work on a side hustle before or after their day job
- Focus on the big picture and don’t nitpick with minutiae
- Want to achieve financial freedom sooner with their one and only life
In the beginning, it’s difficult to get started due to growing student loan debt, wage stagnation, and increased competition for good paying jobs due to globalization. Despite expectations of a large generational wealth transfer, inheritances usually won’t happen until much later in life. But after about 10 years in the workforce, you will start to build momentum, and achieving the net worth targets based on higher multiples will get easier.
If you so happened to have delayed entering the work force because you decided to go to graduate school or go travel the world like a lot of wealthier college graduates do nowadays, no problem! Simply follow the “Years Worked” column to find your appropriate multiple. For example, if you’re 30 years old with no work experience because you spent your 20s getting a PhD, your target net worth multiple is 0.
On the flip side, partly because of such large inheritance expectations, I expect Millennials and Gen Xers to see significant injections to their net worths after the age of 45. Another reason the target multiples of gross income after are higher as we age is because all of us become much more savvy with our money.
When we’re older, no longer can we cry ignorance for not knowing how to properly asset allocate our investments. Further, we become more knowledgeable about long-term investment trends, such as real estate crowdfunding, where one can finally take advantage of passively investing in lower valued properties with higher net rental yields without having to fly to the heartland of America, own physical property and deal with tenant headaches.
By our 40s, we’ve already gone through 20 years of money making wins and losses. Surely, by now we should all understand our monthly budgets, net worth compositions, spending tendencies, risk tolerance, and the importance of diligently tracking our money.
I get much more pushback on my net worth targets from folks in their 20s and 30s than folks in their 40s and beyond. The reason is because when we are young, we think we know what we don’t know. We are more arrogant, more stubborn, and less experienced. As we age, we see the positive effects of compounding that really starts to snowball with a larger financial nut. Accumulating the second million is much easier than the first.
Easier To Live On Less When Older
Being able to comfortably live on less is one of the biggest reasons why it’s easier to hit higher net worth target multiples as you age. The older you get, the desires of your youth slowly fade away because you’ve been there, done that. For example, when I was in my 20s, all I wanted to do was drive different types of luxury cars. After going through more than 10 different cars after college, all I want is one understated car that is reliable and safe.
Let’s say you have a $2 million net worth and make $200,000 a year at age 50. Your multiple is 10X, while I suggest it should be closer to 15X. If you can find a way to live comfortably off only $150,000 a year, or 25% less, then you’re spot on target at 15X. If you can live off $100,000, then you can retire immediately due to a 20X multiple. In other words, the more money you make and the more money you accumulate, the easier it is to adjust your spending downward.
For the first two years after leaving Corporate America, I was making around 70% less than I did while working. Funny enough, my after-tax savings rate still was around 50%. I just became super frugal by cutting out all extraneous expenses. I found joy in the things I already had.
Saving money is also easier when you don’t work because there are lots of free activities and discounts during working hours such as free museum week days, early bird dinner specials, the ability to enjoy free parks, libraries, hikes, etc. Your commuting costs go down and you no longer have to shop for work related clothes.
As a retiree, the biggest X factor are medical expenses and long term care costs. We currently pay $1,600 a month for a platinum health insurance plan for a family of three. Not cheap by any means, but affordable after a couple decades of aggressive saving.
Easy Net Worth Multiples To Remember
The major age milestones everybody thinks about are 25, 30, 40, 50, and 60. As a result, I’ve made it easy for everybody to remember what multiple of their average gross income for the past three years to shoot for.
Age 30: 2X your average gross income
Age 40: 10X your average gross income
Age 45: 15X your average gross income
Age 60 or whenever you want to leave your job: 20X your average gross income
When I left work in 2012 at the age of 34, my net worth equaled roughly 15X my average income over the last three years. In other words, I fell short of my 20X income target. However, thanks to a severance package that equaled roughly six years of living expenses, I was more confident to leave.
Since 2012, I have aggressively grown my net worth by building an online business and watching my investments grow with this bull market, while lowering the amount of income I need to be happy. One of the most pleasant surprises about early retirement is needing roughly 30% less that I thought was necessary. So many people forget that once they retire, they no longer need to save for retirement.
I’ve been well over the 20X income multiple for the past several years and I no longer fear running out of money or being forced to live a lower standard of living. Multiple income buffers such as passive income, online income, and the occassional consulting income ensure financial security.
Remember 20X
If there’s one figure to remember from this post, it’s the 20X gross income multiple. At 20X, even if your net worth provided zero returns, it would still take 20 years to exhaust your wealth while maintaining your same standard of living.
You could of course invest your wealth in a risk free asset like a 12-month CD for a ~2.5% interest rate to extend the life of your principal. Or you could take slightly more risk and try and earn a higher return to increase your odds of your nest egg never running out. Just know that once you’ve achieved a net worth of 20X your gross income, your goal is to never lose money again.
The beauty about a 20X multiple is that you don’t have to wait until you’re over 60 to permanently leave work behind. If you can figure out a way to achieve 20X earlier, all the better!
Please track your net worth like a hawk so you know exactly where you stand and how much more you’ve got to go. There are too many middle-aged folks who wake up one day and wonder where all their money went because they didn’t stay on top of their money. When all they want to do is take it easy, they’re faced with the harsh reality that decades more work is their only option.
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The table suggests, based on $200k income, you should be increasing net worth by $600k between ages 30 to 35. That comes about saving/investing 70% of your income after taxes paid. Is it realistic?
Investment growth too.
Can I count the equity value of my business if I work as a self employed individual where the typical value of the business
Hi Sam. Is this chart that identifies net worth by income updated for 2019 and beyond? It is located here: https://www.financialsamurai.com/how-much-should-my-net-worth-or-savings-be-based-on-income/
I want to make sure that my personal financial growth matches up to your current guidance.
Also, is the goal you recommend 20X expenses or 20X gross income?
Thanks!
Shoot for 20X gross income!
A lot of people complained about the 20X gross income and argued for 20X expenses, but it’s better to go for income.
Sam great read… I have to say that living in CA housing market, the posts about saving a bunch of money living off only $200k is easier said then done. equity plays a huge part of NW. I pride myself on saving and 30% of gross is as good as I can get done barring an emergency. Also, the posts on living expenses vs. income as a calculation is not exactly accurate at first glance , I feel as you are still taxed on that money, correct? I am not sure how that tax is calculated purely in a calculation of expenses x multiple. Getting to $5m seems a task. I think the plan is save, sell the house and get out of CA?
Just a comment for young savers. When you add kids and house, costs can increase at a surprising rate. I used to live on $15k per year when single (albeit 20 years ago). Now it’s close to 10x that, and I consider myself relatively frugal.
20x gross income?? That makes little sense to me. Especially if your retirement expenses are far lower than your working life expenses. More savings is always better but not at cost of working another decade unnecessarily. I plan around 22.5x retirement expenses. Firecalc supports that.
Hi Sam — just curious about the expected return rate on the 20X figure. Seems like that is assuming a 5% return (with no dipping into principal). Given today’s interest rates, seems like a high expectation… wouldn’t 3% be more realistic? And if so that would be more like 30X…right?
Thanks,
-Ben
I think your net worth table is interesting, but the interpretation is something like: This should be your goal for savings to get you to the 20x by 60 (or something similar). A 20x NW is really a 5% withdrawal rate. So this is a different view on the standard rule of thumb – which was usually 4% for 30 years of retirement to slightly less these days according to most planners.
Many of your readers are probably interested in retiring early and want to know when they can be serious about taking the plunge. This table is not that helpful for that question because the focus is increasing savings until the 20x at 60. A more interesting table is the same columns but the factors and values are such that you would be comfortable at any age to retire. So if at 60 you need 20x at 50 you need more – say 27x. The interpretation of the table would be – At whatever age you hit this (age, NW) mark you should feel comfortable trying out early retirement.
Hi Dan, I’ll make it more clear to help you another readers understand The chart. Because I have an original post.
If you can get the 20 X your average household income, no matter your age, I declare you as financially independent and can retire early if you want, at whatever age.
When you refer to “average household income” in the 20 X recommendation, are you referring to NET or GROSS?
Thanks Sam.
I’m referring to your gross average household income over the past three years, since top line can’t be manipulated.
But you are welcome to use the average NET income if you want to be more aggressive.
Sam, is there an easy way to translate your advice – graphs, financial goals etc. for someone planning on moving to England?
Can you recommend a British counterpart of yours or something? :)
Most of my life I made much less than I do now. It was only in the last 8 years that my income jumped and I played catch-up. If the first 3/4 I made much less, but now make much more. How do you suggest I calculate?
I believe that if you want to have a higher net worth, or more importantly wish to retire young, the key is to start in your youth. With compound interest on your side, starting to contribute to a Roth ira at 16 can be the most beneficial decision in your life. I built up an extensive savings by the age of 15 working at the golf course and with my stock portfolio. At 16 I opened up a Roth IRA with my Etrade broker and begun contributing. My goal is to max out the IRA ($5,500) every year so that when I am out of college I will already be more than 5 years ahead of my peers. With compound interest on my side this will allow me to retire much younger than anticipated.
Sam – Is this total net worth (i.e., includes home equity) or liquid net worth? Thanks.
Total net worth. Thx
Thanks for the crazy fast response, Sam.
I’m 45, husband 48. Large gorgeous house (bought long ago in SF Bay Area) in wonderful area is conservatively worth 500k, could be as much as 650k+ with cosmetic improvements in current market (though no intention to ever move). 250k equity, very low monthly payment on 265k mortgage (40% or less than market rate for comparable rent). Credit is shot but not a lot of need to borrow for anything. Very low income. I’m self-employed making $15k-$25k (could go higher with 10x more hustle). He’s making $50k/year in blue collar job working 80 hours a week (but he loves it, keeps him out of trouble). 2 amazing resourceful kids in public school and doing low-cost activities. 1 old car we love. Very good at living on not much money. $225k in Vanguard IRA. $12k debt incurred last year for medical expense, intend to refinance it (also claimed it on taxes). How are we doing? Do I calculate correctly that our net worth is ~$500k (IRA plus house)?
I hope someone will answer — in past comments I have found us low-income types don’t get any attention on this blog, but I totally agree with FS principles (and just read Millionaire Next Door). I have several streams of passive income and am building them up (currently they are making $300/month income and that’s enough to make me take notice!). Also working on remodeling a space to Air BnB it for additional passive income.
65 to 75k is low income? That’s well above the median income in the US and around the median in the bay area ) Your income may not be as high as some but you are not low income.
I think you are calculating your net worth correctly given the numbers you have reported. You are at about a NW to income multiple of 6.5 to 7.5, which is pretty low for your age. So to answer your question of how you are doing… Not great.
Thanks for replying! You actually gave me a boost with your comment that we are not low income.
However, this 2015 table from has the following definitions for Alameda County, family of 4:
moderate (!) income for family of 4 = $112,200
median = $93,500 (as I thought)
low income = $71,600
very low = $46,750
extremely low = $28,050
Wow! If we were pulling in 6 figures, while still spending as little as we do now, WE’D BE SO RICH. Or is that flawed thinking? Save now today matter how much you make?
Anyway, thanks and at least I’m on the right path in knowing where we stand. Much more to do in terms of savings and safety net. Could be cool for FS to do an article on how people like us live so well in such an expensive area — it still seems like his focus is on high earners even when he wonders how people live in Manhattan or SF. I super appreciate his perspective on SF Bay being worth it. Love LA but there are too many people there.
As a CFP I appreciate what you do and your straightforward Keep It Simple Stupid Kiss approach to building wealth and savings for retirement. Cheers. Next time youre in Ann Arbor would love to grab a beer✌️
My husband and I are both 31 with a 2X multiple. We had no student debt when we graduated together at age 21, but we also had three kids in our 20s and I “retired” at 24 to stay home with them, even though I had the higher income. It has been worth it, but I cringe a bit when I consider what our multiple would be if I had kept working…
Another great post Sam. I read this when it came out but looked again today. To the Canadians on the forum, you definitely need to make appropriate adjustments in your thinking while considering the wealth targets. Our taxes are overall considerably higher making saving much more difficult particularly above $200K (but true throughout the spectrum). Our health care is conversely much more affordable so less of a consideration for retirement needs, at the moment anyway. Our government sponsored social benefits on retirement are approximately half those available to our US friends in the foreseeable future (I’m talking CPP+OAS versus SS when both are at the max level). In general our costs of living are higher in many categories but Toronto and Vancouver would be comparable with SF, Boston, or NY in round numbers. There are many more differences, and some of these are quite material when you are talking about your retirement passive income or capital scenarios. So, puts and takes for sure that we Canucks need to related to. Otherwise, the analysis is very helpful and while aggressive, that’s good and in the spirit of the FS approach.
Using the Mint App, my net worth is still negative with all my student loans. At 29 that is pretty depressing. I’m slowly building up my wealth, but I’m going to have to do something drastic to meet those target goals. How much do kidney’s go for on the black market?
Thanks for sharing!
I heard in IRAN kidney’s get sold for $5,000!
For some reason, your comment really resonated with me. I clearly remember the day I got to a positive net worth. I thought, “I’m finally breaking even.” Then I thought, “I’m worthless” What a great day!
Hi! I like your site! Thank you! I just stumbled into it when googling for buying RE on leverage led me to one of your past posts. Your site has interesting reads and makes me think…
I’m 40 and my NW including RE reached 21 x Income. But my semi-liquid assets (including retirement) is at 18 x expense. Reverse of Tenser’s situation due to difference in ratio of RE and ‘semi-liquid’ assets, income & expense being not much different. Do equities in retirement accounts count as ‘semi-liquid’ assets?
Hi Sam,
speaking from where I live, perhaps there are two groups and not one single chart as you have it.
Two observations:
[i] There is a ‘critical mass’ net worth amount, that varies where you live. Once you hit that level, investing to gain new income streams gets much easier. In Bay Area I propose that’s around $2-3M.
[ii] I’ve come across 2 groups of wealth-builders: achieved CM early (say, age 35-40) and later (will get CM by say 55-65). Not many fit in between, so I see 2 groups with a 20 year gap. The second group I am familiar with mostly have a slow flat line of nw growth until they moved here and then it suddenly jumped up due to opportunity.
Explanation –
Anecdotally, all the Group 1 folks I’ve met got there fast through right place/right time opportunity at a new business venture(s). I observe that many 30-somethings who have net worth CM have >$3M nw got there through “being here”. Now they can invest and achieve that smoothly rising growth chart you show.
All of (us) Group 2 folks lacked the opportunity to be early so our chart will almost certainly have lower numbers until we too “get lucky” and catch up. Example, in my case, raised in small town NE rust belt, hardworking culture but places like Manhattan and SF were *not* on my parents or neighbors radar. (In my home county, I estimate $0.5M nw is regarded as CM).
Once I got to the Valley, things changed and I too got a connected, met cool people and got relatively lucky. Where I came from, we had to seek out new-technology, tools and startup news but here, its in your face daily; one drinks from a fire hose of information leading to opportunity. So, even though I and others started late, we caught up quickly. Our charts are not linear.
Dave in San Jose