Have you ever wondered how you stack up against other people financially?
It’s not uncommon to want to measure your financial situation with others who are in a similar age range or stage of life. These comparisons are often made on an income basis. In other words, how much money do you make compared to other people your age or in your life stage?
But it’s sometimes more revealing to make the comparison on the basis of net worth, including net worth by age.
Why is net worth important?
But why does “net worth” even matter?
Everyone has a net worth. Your net worth is a key indicator of your financial health, and knowing yours can help you manage your money better.
Your net worth is a bird’s eye view of your complete financial situation. Tracking it over time is a valuable indicator of your financial stability.
Average net worth by age
Empower conducted proprietary research to determine the average and median net worth of our typical dashboard user. Following are the average and median net worth of these individuals, broken down by age.*
| Age by decade | Average net worth | Median net worth |
| 20s | $99,272 | $6,980 |
| 30s | $277,788 | $34,691 |
| 40s | $713,796 | $126,881 |
| 50s | $1,310,775 | $292,085 |
| 60s | $1,634,724 | $454,489 |
| 70s | $1,588,886 | $378,018 |
| 80s | $1,463,756 | $345,100 |
| 90s | $1,318,023 | $315,085 |
How is net worth calculated?
Net worth is simply everything you own, or your assets, minus everything you owe, or your debts. It is calculated by subtracting what you owe to creditors from what you currently own. Or put another way, it’s the value of your assets after you’ve subtracted all your debts and liabilities.
What makes up your net worth?
Your net worth is the total value of your assets minus your liabilities. Following is a look at what the Federal Reserve Board considers to be assets and liabilities.1
Assets
- Cash within bank accounts, such as checking, savings, money market accounts, etc.
- Prepaid debit cards
- CDs and savings bonds
- Government bonds
- Health savings accounts
- Investment accounts, including 529 college savings plans and individual taxable investment accounts
- Retirement accounts, including IRAs, 401(k)s, and 403(b)s
- Life insurance policies with cash value
- Annuities with equity
- Value of vehicles including cars, RVs, motorcycles, boats, and helicopters
- Value of real estate, including rental homes and primary/residential homes
Liabilities
- Mortgages
- Home equity lines of credit or home equity loans
- Credit card balances
- Installment loans, including personal loans, auto loans, and student loans
Building net worth by age
Remember that building net worth is a gradual process that occurs over the course of a person’s lifetime.
It takes time!
As the data shows, net worth tends to increase over a person’s lifetime until the 60s. At this stage, net worth gradually begins to decrease as income falls during retirement and funds from investment accounts are withdrawn to meet living expenses.
Here are some tips for building net worth during each decade of life:
In your 20s
For many people, the 20s are the time in their life when they are starting their professional lives and possibly a new career. Your earning potential may be somewhat limited, which might make it seem difficult to build net worth during this decade. The key is establishing good financial habits and disciplines that will help you build net worth over the rest of your life, such as setting aside a certain percentage of pay each month to save and invest.
In your 30s
One of the keys to building net worth during this life stage is continuing to prioritize saving and investing. It can be easy for higher earnings to get swallowed up in mortgage and car payments, child-rearing expenses and splurging on a few luxuries like nice vacations and fancy dinners. Instead, it’s important to maintain the saving and investing disciplines that were established in the previous decade and even increase the percentage of income saved.
In your 40s
Growing financial responsibilities can make building net worth especially challenging during the 40s. One way to meet the challenge is to avoid falling into the trap of what’s sometimes referred to as “lifestyle creep.”
As income grows, you may be tempted to try to “keep up with the Joneses” by moving into a bigger home, joining a country club, driving exotic cars or going on expensive vacations. It may be OK to enjoy the fruits of your labor, but keeping expenditures like these in check may go a long way toward building net worth during this life stage.
In your 50s and 60s
The 50s and 60s mark the beginning of the “stretch run” toward retirement for many people. The time window for building net worth during the wealth accumulation stage of your life is starting to shrink as retirement draws closer. Given the shrinking window before retirement, one of the most important net worth-building steps for you in your 50s and 60s may be to max out your retirement accounts. It’s also critical to consider paying down outstanding debt during this time.
In your 70s and beyond
During this life stage, the focus usually shifts to budgeting and portfolio withdrawal. Once you’re a retiree, you can either withdraw a set amount of money each month or withdraw a percentage of the portfolio balance each month. With the first strategy, the amount of income is more predictable, which makes budgeting easier. But you generally have more control over the portfolio’s overall drawdown and potential longevity with the percentage method.
How do you build net worth?
If you are ready to take steps to build your net worth, here are a few ideas to consider:
Go automatic. When your money is automatically transferred into a savings or retirement account each month, you don’t need to think about it. As your income grows over time, increase the amount of money that’s transferred into savings.
Pay down debt, especially high-interest credit card debt. Once you are consumer debt-free, consider paying down your home mortgage if you have one.
Watch your spending. The less money you spend, the more you’ll have to save and build your net worth. For example, cut down on eating out at expensive restaurants, pare back your vacation budget and eliminate streaming services that you rarely use.
