What does it take to be above average in net worth in this country?
According to date from the 2013 Survey of Consumer Finances, helpfully presented by DQYDJ, the answer is “not a whole heck of a lot”.
The 50 percentile ranking for those age 50-54 is $122,100 of net worth. Even assuming social security will still be around in its current form, that’s not a whole lot to live off every month. And if you’re planning to retire early like many of the readers of this blog, you will need a nest egg that sustains you for years before social security even kicks in.
Assuming you will need at least $1 million (i.e. $35k a year using the 3.5% rule), you will actually want to be targeting and tracking your pace to somewhere between the 90% and 99% brackets of your age group. At the 90th percentile for those aged 50-54, folks are just cracking the million mark. The earlier you want to retire compared to that age 50-54 bracket and/or the more you need above $1 million, the closer you need to be tracking to the 99th percentile rather than the 90th percentile.
2013 Net Worth By Age
For some, this may be a rude wake up call. Those figures climb pretty quickly in the later years. This observation, though, should feel like an opportunity to you rather than a burden. The power of compound interest will work for you if you squirrel away savings early. In other words, capital begets more capital.
Don’t leave this tool unused! Save as much as you can as early as you can, even if it involves temporary sacrifices which feel difficult.
By living in a 325 square foot apartment for 5 years, I’ve probably saved $81k in rent. That $81k was in the market working for me (some for 5 years, some for 1 year), and is actually now worth closer to $100k.
With the 3.5% rule, foregoing a nicer apartment will have yielded me $3,500 a year forever. That’s a lifetime of annual vacations, or a lifetime of having weekly maid service so my husband and I don’t ever have to pick up after ourselves! We wouldn’t ever actually do this, but it’s amusing to think about. Alternatively, we could use this money as seed money for a larger investment in the future. A seed of $100k starting now would easily allows us to cover two children’s tuition to expensive private colleges in 20 years. We got to experience the same amazing aspects of NYC as anyone else, but we’ll have paid for our kids’ college with one temporary sacrifice back when we were young enough for it not to bother us.
The Net Worth Calculator
If you are interested in getting your exact percentile ranking, check out DQYDJ’s net worth by age calculator right here.
And remember, wherever you are starting, the power of compound interest will be working for you the sooner you make important changes.
Note: The guidance these figures provide for your own net worth pacing is only approximate; note that the different age cohorts have experienced different market conditions over the course of their adult lives (this is a cross-sectional study rather than a longitudinal study)
Looking For A Way To Track Your Net Worth?
You can manage all of your accounts through Personal Capital. Personal Capital offers a free dashboard that gives you a real-time, updated view of all your investments and makes recommendations for how to lower your fees as well as benchmarks your portfolio’s performance against major indices. This is the dashboard I use to manage and tweak my own portfolio.