To have a top one percent net worth is an impressive achievement. Your net worth is literally higher than 99 percent of the population. 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 Financial Samurai community. Financial Samurai has been around since 2009 and caters to a mass affluent demographic.
- You are surprised how low the top one percent income levels are.
- It’s not how much you make, but how much you keep.
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 2021 is now at least $470,000. The income level was only about $400,000 just in 2012. Don’t be on the wrong side of inflation. Inflation is why you must consistently invest in stocks, real estate, and alternative assets over the long term.
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. You’ll build a top 10 percent net worth by age.
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.
However, if you want to achieve a top one percent net worth by age, then you’ve got to shoot high.
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.
You can shoot for a $10+ million net worth per person or per household. The estate tax exemption amount limit is currently $11.7 million per person.
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, a top net worth for this age hits $9,400,000, which is very close to the $10,000,000 overall top one percent net worth figure.
Top One Percent Net Worth By Age Chart
1) A top one percent income for all age groups is about $470,000 in 2021 using data from the IRS, the Economic Policy Institute and The Washington Center For Equitable Growth. 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 2021, 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 an elite net worth level 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 income levels 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 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.
Further, retiring with 10 million dollars in an ultra-low interest rate environment is a goal more households are aspiring to achieve. After all, $10 million can only generate ~$160,000 a year in risk-free income. If you take moderate risk, $10 million could achieve up to $400,000 a year in passive income.
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 $470,000 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 one percent 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. $10 million is the ideal net worth amount for retirement.
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 The Top
Whenever I lack motivation to grow my net worth, I like to jog around the Gold Coast of San Francisco. There lies the $20 – $50M mansions that line Pacific Avenue.
I know I’ll probably never be able to afford such nice places overlooking the Bay. However, 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 be rich 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 average income
The math comes out to about $10 million per person. Once you’re at $10 million, you will have achieved a rarified net worth level.
Favorite Ways To Build Wealth
The great thing about this net worth challenge is that there’s a myriad of ways to get there. Here are my favorite ways to build wealth and get to a top one percent net worth.
1) Join a high-paying industry
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. Once you’ve joined the industry, stick with the industry for at least 10 years. If you do, you will undoubtedly have a top one percent net worth for your age group.
2) Focus on building passive income
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.
Further, passive investment income is taxed at a lower rate than W2 day job income. Therefore, you will build net worth more efficiency. In my opinion, buying rental properties, investing in real estate crowdfunding, and owning dividend stocks are the best way to achieve a top one percent net worth.
3) Start an online business
As we’ve learned from 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.
4) Invest in real estate
Every top one percent net worth person I know has a very healthy real estate portfolio. Real estate alone has made me millions since I started investing in 2003. I plan to continue investing in real estate to take advantage of a multi-decade positive demographic trend.
Check out Fundrise and their eREITs. eREITs give investors a way to diversify their real estate exposure with lower volatility compared to stocks. Income is completely passive and there is much less concentration risk. For most people, investing in a diversified eREIT is the best way to go.
If you are bullish on the demographic shift towards lower-cost and less densely populated areas of the country, check out CrowdStreet. CrowdStreet focuses on individual commercial real estate opportunities in 18-hour cities. For investors with a lot of capital, you can build your own best-of-the-best real estate portfolio.
Both platforms are free to sign up and explore. I’ve personally invested $810,000 in real estate crowdfunding to earn income 100% passively. Further, I want to diversify into the heartland of America where valuations are cheaper and demographic trends are strong.
Keep Track Of Your Net Worth
Look, I know nobody needs to be rich. You can just as easily be happy with a median household income of $68,000 and a median household net worth of $120,000.
However, if you want a challenge, why not shoot for more? Achieving a top one percent net worth by age group is a good goal to have! 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.
As you net worth grows, you need to stay on top of it. Wealthy people have more complicated net worths than the rest. The best ways to manage your wealth for free 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.
Featured image by Colleen Kong-Savage.