By its nature, personal finance invites comparison, and as we discussed before, net worth is a great metric to track. Working hard to earn more money, keeping a close eye on your expenses, and looking for ways to maximize your investments is hard work.
You want to know if you are on track, behind, or better yet, kicking everyone else to the curb! What better way to see how you are doing than to compare your net worth to other Americans? Well, I was curious about my net worth too and what I found amazed me.
Now, before you check out the chart below, you should probably go ahead and calculate your own net worth. Don’t worry if it’s low or even negative. The important thing is to know where you are starting from, then setting goals and putting a plan in place to achieve them. Once you know your net worth number, read on.
Compare Your Net Worth to Other Americans
Some caveats about the data below. First, these are census numbers, so they only reflect the net worths of people that actually filled out the census forms. I don’t know how respondents skew by income, but I suspect that higher income folks may be less likely to fill out census forms. That’s just a guess, but that may be bringing the numbers lower than they otherwise might be. Regardless, it’s the best information that we have.
The other thing to note is that these are median numbers and are not averages. This means that these figures are at the middle point for people that reported their net worth in the census and are not skewed higher or lower by people with very high or very low net worths.
Reference the table below to compare your net worth to other Americans and see how you are doing:
I don’t know about you, but I am shocked at how low these numbers are! The rule of thumb for financial planning is that if you live off 4% of your investable assets, then your nest egg is likely (but not guaranteed) to last you about 30 years. So, for example, if you want to live off $100,000 a year in retirement, you should have $2.5 million in investable assets (which does not include the value of your primary residence, since those funds are not investable).
If you use the 4% planning figure, then just multiply your desired income by 25 (one divided by 4%) to get the amount that you will need to have saved. For the median American in this survey, if you exclude the value of their primary residences, the median 65-69 year old only has a net worth of $43,921. That means they will have to retire on $1,757 ( $43,921 / 25) per year plus Social Security. Not a good scenario.
Don’t Shoot for Average – Be Prepared
Trust me, you do not want to be one of the median Americans above. I’ve lived off a low income before and I’ve lived off a high income. Higher is better. If I were shooting for average, I would have stopped saving money years ago. The reality of the situation is that the average American is woefully behind in savings.
The fact that you are even reading this article is a great start. People that educate themselves on personal finance issues and formulate a plan have a significantly higher net worth than people that don’t go to the trouble. Make sure you go to the trouble. If you think about the alternative, it’s really no trouble at all.
What is your net worth? Is it higher than you thought? How do you compare to the median figures for Americans above?