To have a top one percent net worth is an impressive achievement. However, what is a top one percent net worth amount exactly? Further, it’s probably more appropriate to shoot for a top one percent net worth by age. After all, it’s not fair to compare your net worth at 25 to someone’s net worth at 50.
After publishing, The Top 1% Income Levels By Age Groups, there were two main responses from the community:
- You are surprised how low the top one percent income levels are.
- It’s not how much you make, but how much you keep.
The top on percent income levels for all the age groups looks a little light compared to the overall median top percent figure of $380,000 as reported by the IRS back in 2013.
However, the income levels are all the MINIMUM amounts you need to make in order to be classified in the top one percent. In other words, making $210,000 as a 32 year old puts you in the top one percent for your age group. So does making $350,000.
Thanks to economic growth and inflation, a top one percent income level for 2020 is now about $470,000. The income level was only about $400,000 just in 2012. Don’t be on the wrong side of inflation.
The top one percent income of $470,000 can be individual income or household income. The income is reported income to the IRS, so there is a combination of both.
The Easy Net Worth Target: 20X Gross Income
For most people, I recommend following my Net Worth Targets By Age, Income And Work Experience post if you want a challenging, but highly realistic guideline for wealth accumulation.
The magic multiplier is 20X. Once you’ve accumulated 20X or more of your average gross income, you should have no problem planting the Financial Freedom flag in your backyard!
For those of you who like challenges, let me share my latest top one percent net worth targets by age. After all, the more you make, sometimes the easier it is to go crazy and spend all your money.
Overall Top One Percent Net Worth Chart
Overall, a top one percent net worth amount in America is a little over $10,000,000. With this net worth figure in mind, we can construct a top one percent net worth guide by age.
My guide uses a top one percent income of $470,000 and my ideal income multiplier by age to calculate a top one percent net worth by age. By around 60, the top one percent net worth hits $9,400,000, which is very close to the $10,000,000 overall top one percent net worth figure.
1) A top one percent income for all age groups is about $470,000 in 2020 using data from the IRS, the Economic Policy Institute and The Washington Center For Equitable Growth. Back in 2013, the top one percent income for all age groups was $380,000. I use $470,000 for all ages starting at 25 to keep consistent with the overall median top one percent income figure for all tax returns.
2) The top one percent net worth figures are based on my latest net worth target income multiples. You certainly don’t want to have an average level of finances in America because the average American is in poor financial shape. I believe most of us can achieve these income multiples if we meticulously track our net worth, invest our money wisely, and spend extra effort earning. One income stream is often not enough.
3) You have a belief that it’s a waste of money to die with more than $11,580,000. In 2020, the estate tax exemption amount is $11,580,000 per person and double for a married couple. Allowing the government to tax you ~40% on any wealth above the exemption amount is a travesty. Please spend or donate your money to a worthy cause.
4) The median life expectancy of about 80. Hence, if you’re fortunate enough to make $470,000+ a year and achieve a top one percent net worth by age, come up with a plan to live a balanced lifestyle. You don’t want to die with too much money. Instead, you want to enjoy your wealth to the maximum while living.
A Variation To The Top One Percent Net Worth By Age Guide
Here’s a variation using the different income levels by age required to be in the top one percent as reported by Professors Guvenen, Kaplan, and Song and adjusted for inflation since their 2013 report.
It’s unreasonable for a 25 year old or 30 year old to make $470,000. Therefore, it’s good to look at one a top one percent income level is for each age group. The methodology below is a more precise. Wealth is correlated with age.
After the age of 65 and $11,750,000, it doesn’t really matter what you do with your money. Again, just make sure you donate any money over the $11,580,000 estate threshold to good causes so you don’t pay a ~40% estate tax on anything over.
The above top one percent net worth levels by age chart is the more precise chart to follow. Shoot to accumulate a net worth of $400,00 by 30, a net worth of $3,200,000 by 40, a net worth of $7,050,000 million by 50, and a net worth of $9,400,000 by 60.
Ultimately, all roads lead to Rome. Ideally, you want to build a net worth equal to about $11,750,000 by the time you are 65 and retired. The figure gels well with the estate tax threshold of $11,580,000 today.
Net Worth Chart Review
The more you make, the easier it should be to save and grow your money. You only need so much for food, clothing, transportation, and shelter. Everything else is discretionary, which means it’s up to you to be disciplined.
If you make over $400,000 a year and can’t save at least 30% of your gross income, then you’ve probably got a spending problem. Let’s be honest. America has a spending problem.
There are certainly those who make top 1% income who are living with a lot of money stress. But such stress is largely self-induced. Lifestyle inflation is almost an inevitability once you start making big money. This is why paying yourself first is a must no matter how much you make.
What’s nice about my 20X income gross income multiple is that it really doesn’t matter how much you make to achieve financial independence. At each level of income, we will learn to live within our means. With a top one percent income, you’ve got a lot more flexibility. If you choose to maintain a top one percent lifestyle, then $10,000,000 is a realistic net worth figure to shoot for.
A $5,000,000 net worth is the #1 vote getter in the FU money poll, which asks how much money you think you need to feel financially free. But $5,000,000 is 50X the rough median income of 17,800+ entries in my income poll. People are actually overestimating how much money they really need to be financially free by a 30X multiple!
Since I left the work force in 2012, I’ve discovered I overestimated how much I would need in retirement by roughly 30%.
We have a tendency to overestimate what we need because we fear the unknown. We also forget that once we retire, we no longer need to save for retirement! Almost every other retiree has told me they also overestimated how much they needed.
Goals To Get You To A Top Net Worth
Whenever I lack motivation to grow my net worth, I like to jog around the Gold Coast of San Francisco and check out the $20 – $50M mansions that line Pacific Avenue.
I know I’ll probably never be able to afford such nice places overlooking the Bay, but I still find inspiration in the success of others. Every single homeowner on the Gold Coast is an entrepreneur.
When you review my charts, I want you to get motivated as well. If you want to have a top one percent net worth level in America, your goals are simple:
1) Earn a top one percent income for your age.
2) Earn a overall top one percent income of $470,000 or more.
3) Amass wealth that is equal to 20X or greater your top one percent income
The math comes out to about $10 million per person. Once you’re at $10 million, you will have achieve a top one percent net worth level.
Favorite Ways To Build Wealth
The great thing about this top one percent net worth challenge is that there’s a myriad of ways to get there.
Perhaps the easiest way to reach a top one percent net worth is to join an industry that pays well and be a top performer. If you want to be rich, logically, you’ll choose a higher-paying industry.
The most common way everyone can strive for a top one percent net worth is to aggressively save and invest in top passive income investments. Building an army of money soldiers who will grow in size through compounding is incredibly powerful. Earning your 10th one million dollars is much easier than earning your first million.
Finally, in the time of COVID-19, starting an online business that can’t be shut down is a no-brainer. The key is to just start and figure things out as you go. Don’t get caught up with needing an original idea. For example, I know one fella who made over $40,000 last month selling pool and hot tub supplies and he doesn’t even own a pool or hot tub! The possibilities are endless.
Look, I know nobody needs to have a top one percent net worth. You can just as easily be happy with a median household income of $64,000 and a median household net worth of about $100,000.
However, if you want a challenge, why not shoot for more? Even if you don’t get there, you’ll get much farther than if you didn’t push yourself.
So long as you are making progress, you will enjoy the journey. Never forget that money is simply a tool to lead a better life.
Readers, are you shooting for a top net woth? Do you have a specific net worth target where you think you will feel financially free?
Free wealth management tool: One of the best ways to manage your net worth is by signing up with Personal Capital. Use the free tool to help build your net worth more easily. I’ve used Personal Capital since 2012 and it’s made a world of difference.
Updated for 2020 and beyond. Featured image by Colleen Kong-Savage.