How Your Net Worth Should Change as You Age

If you have read my articles for a while, you know I am a big fan of studies that give a perspective of where the average American stands financially, such as net worth by age.

Now, let me be clear: I wouldn’t use the studies as a basis for a financial plan by any stretch of the imagination. These studies don’t mean people are in a good or bad financial situation. Plus, they include a large contingent that lives below or at the poverty line.

However, why I like these studies is twofold.

First, finances are still taboo to talk about. Thus, most people have no sense of where they stand compared to their peers. You see your neighbor, who seemingly has the same income as you, driving nicer cars and going on more vacations. Perhaps they are living above their means.

Second, seeing where others stand can serve as a motivator if you are below average. No one likes to be below average — unless we’re talking about our weight — and generally, I like putting these things out there to serve as a litmus test of sorts.

The study I’m referencing today was put out by the Federal Reserve from its 2022 Survey of Consumer Finances (the most current available), which discusses the average net worth of Americans.

As a quick review: Net worth equals assets minus liabilities. For instance, if you have $800,000 in assets and $200,000 in debts, your net worth would equal $600,000.

Facts and figures of net worth

Let us get into the facts and figures, shall we? The report discusses both the average and mean, along with the median, or the middle, net worth. There certainly is a huge distinction between the two, but I’ll give you both as a reference point.

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At the highest level, the average net worth in our country of all households in 2022 is $1,059,470, while the median is $192,700.

Here is my commentary on some of the facts and figures in the report.

20s

Age range 20-24
Average net worth: $120,896
Median net worth: $10,800

Age range 25-29
Average net worth: $120,185
Median net worth: $30,160

My thoughts: From ages 20 to 30, the average net worth barely moves, at about $120,000. My hunch is this is a very skewed age group. Most people in their 20s don’t have a lot of net worth.

However, there is a large concentration of individuals who do, many because of wealthy parents or grandparents.

The better figure for this age group would be median net worth. You can see by the end of your 20s, that is only a modest $30,000.

With the amount of student loans out there and the inflationary environment, it does not surprise me that the average 20-year-old hasn’t accumulated much net worth.

30s

Age range 30-34
Average net worth: $258,073
Median net worth: $89,801

Age range 35-39
Average net worth: $501,289
Median net worth: $141,200

My thoughts: I found this age group to be the most fascinating. Look at the huge jump from the early 30s to the late 30s in both median and mean net worth. There is a 100% increase in the average net worth and a 60% increase in the median.

In my experience, you are seeing people really starting to hit their earning stride by their mid to late 30s. They are now established in their fields and still have younger (less expensive) children.

Thus, you can see this age group starts to really ramp up their savings and are likely to own a home, both of which are contributing to a steep increase of these figures in their 30s.

40s

Age range 40-44
Average net worth: $590,718
Median net worth: $134,730

Age range 45-49
Average net worth: $781,923
Median net worth: $212,800

My thoughts: Hello, other fortysomethings, nice to meet you. I am certainly interested in my fellow 40-year-old averages.

What you are seeing here is not a huge growth in their early 40s. In fact, the median net worth goes down in the early part of this decade, while starting to make some headway in those later years.

I’d attribute this to children’s expenses creeping up, and in the latter half of this decade, individuals approaching peak earning potential.

50s

Age range 50-54
Average net worth: $1,132,532
Median net worth: $272,800

Age range 55-59
Average net worth: $1,442,075
Median net worth: $320,700

My thoughts: Alas, we have made it to the average net worth hitting the seven-digit mark by eclipsing the million-dollar barrier.

Anecdotally, I’d say if you are in your 50s, it generally is a good time to hit a seven-figure net worth. Your home has some real value, those 401(k)s should have some benefit of compounding through the years, and you likely have additional savings elsewhere.

60s

Age range 60-64
Average net worth: $1,675,214
Median net worth: $394,010

Age range 65-69
Average net worth: $1,836,884
Median net worth: $394,300

My thoughts: This is the decade where we would anticipate net worth hitting its zenith, and it does for average net worth.

Generally, most people are retiring in this decade and thus living off their assets rather than continually accumulating assets.

The peculiar thing here is the median net worth doesn’t quite top out this decade. I’m not entirely sure why, but my humble guess is that enough people are living off of Social Security that it creates a nice little boost for individuals.

70-plus

Age range 70-74
Average net worth: $1,714,085
Median net worth: $433,100

Age range 75-80
Average net worth: $1,630,969
Median net worth: $316,000

My thoughts: As one would expect, net worth at both the median and mean level starts to dip in one’s later years.

Medical expenses, giving money away and simply using one’s funds would be the top three reasons why this would be.

Naturally, it would be nice to continue to see your assets grow during these decades, but the reality is we’ve saved for all these years, ideally to use our assets to live.

What do the top quartiles look like?

Bonus data for us all: Now that we know what the average looks like for Americans, what do the top quartiles look like? I think this would be the better litmus test for our clients.

Thus, if you are going to compare yourself to any demographic, I’d look at the 75th percentile by age. When it comes to percentiles, you’re comparing data as percentages at specific points, and it’s a simpler way to see how one data point ranks against others within a set of data.

So if we’re looking at 75th and 90th percentiles, you can see how you rank compared to those who are in the top quarter of net worth and then the top 10% of net worth by average.

I’ll show the 90th for you high earners and overachievers, but pay especially close attention to the 75th percentile data.

Large data is always a fascinating thing to me — guess I chose the right profession (ha). I never put too much emphasis on this personally. However, it certainly can help you get a grasp on whether you are ahead of the game or behind.

In any situation, personal finances are a very personal thing. The best litmus test is always how you are doing against yourself.

• Are you maximizing what you can based on your unique situation?
• Have you put yourself in a good financial position for both now and in the future?

Those are the exact questions you should be reviewing constantly and why we exist as a company.

Hope you enjoyed this little lesson, and as always, stay wealthy, healthy and happy.

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