Allworth’s Advice: What is your net worth?
Amy Wagner and Allworth Financial talk about their net worth
allworth financial
Around the age of 50, the average American can expect to have a household net worth of more than $1 million.
How did so many people in their 50s become millionaires?
Household wealth has ballooned at a record pace during the pandemic. From 2019 to 2022, after adjusting for inflation, the median net worth of U.S. families rose 37% to $192,900. This is the largest increase ever recorded by the Federal Consumer Finance Survey released last fall. Soaring housing prices and an increase in stock holdings were factors that pushed it up.
Some of the new numbers are surprising. The average household net worth for Americans in their late 30s is now over $500,000. For those in their late 40s, that number exceeds $750,000. By the age of 50, it will reach seven figures.
If you’re in your 50s and aren’t worth a million dollars, don’t despair. These numbers are averages, and the ultra-wealthy are pushing these numbers higher and higher.
The “median” American household (imagine the middle number on a long list of numbers) has a net worth of around $300,000 in the 50 to 59 age range, with a net worth of around $1 million. It’s far from it.
Here is the breakdown of net worth by decade:
To illustrate how wealth accumulates over the years, here’s a decade-by-decade breakdown of America’s net worth.
20’s
- Average net worth: $120,896 (20-24 years old), $120,185 (25-29 years old)
- Median net worth: $10,800 (20-24 years old), $30,160 (25-29 years old)
Most of us in our 20s are just getting started. We work our first jobs for relatively low wages. We’re digging into student debt. On the upside, you probably won’t have to spend as much on other things.
“This is your first time going out alone.” Liz Gillette, a certified financial planner in Edgewater, Maryland. “Debt comes with it, whether it’s your first car or student loans. And you’re just building your path to saving for retirement.”
For people in their 20s, “the biggest factor is debt.” Jonathan Swanberg, a certified financial planner in Houston. “You have a lot of student debt and you haven’t had the opportunity to work, so your net worth is often negative. You’re just trying to dig your way out of a hole.”
30s
- Average net worth: $258,073 (30-34 years old), $501,289 (35-39 years old)
- Median net worth: $89,801 (30-34 years old), $141,200 (35-39 years old)
Americans in their 30s may be looking to get out of college debt, buy their first home, and start a family. Their income is probably increasing, but so are their expenses. Let’s think about diapers.
“Let’s say they manage to pay off most of their debt,” Swanberg said. “They’re starting to put money into their 401(k)s. And that basically starts the process in a positive direction.”
Many in their 30s are beginning to experience the miracle of compound interest. This means you’ll see the investments you made in your 20s grow in value as you earn interest on both your initial investment and the interest you’ve already earned.
Compound interest helps explain why people in their late 30s have an average net worth of $500,000.
“I probably started investing when I was 25,” Gillette said. “Now you say he’s 35 years old. It will take him 10 years for that money to grow.”
Forties
- Average net worth: $590,718 (40-44 years old), $781,923 (45-49 years old)
- Median net worth: $134,730 (40-44 years old), $212,800 (45-49 years old)
When we reach our 40s, that home we bought in our 30s builds up some serious equity as our mortgage payment balance shifts from interest to principal. We are entering our most profitable year yet. Having children will cost you even more.
“People probably got married, bought houses, had children,” he said. peter lazarov, a certified financial planner in St. Louis. “That’s what I call full adult development.”
Home equity and appraised value, along with the aforementioned miracle of compound interest, can help push your average net worth into the top six figures.
“If you have a 30-year mortgage, you’re probably halfway done,” Swanberg says.
50s
- Average net worth: $1,132,532 (50-54 years old), $1,442,075 (55-59 years old)
- Median net worth: $272,800 (50-54 years old), $320,700 (55-59 years old)
Welcome to Millionaire’s Row. By the time they reach their 50s, many Americans have achieved the mythical status of millionaires, with their household assets worth at least $1 million more than their debts.
Our home is now our property and may increase in value as we enter the final year of our mortgage. If we started saving for retirement in his 20s, his 401(k), which has earned him 5% to 10% over the years, is amazing.
“Once you’re in your 50s, most retirement accounts start compounding,” Lazaroff says.
Your children may be attending college, but this is one of the biggest expenses you and they will ever incur. But when it’s over, your nest will be empty. You start planning for retirement in earnest.
“There seems to be something magical about turning 50 and saying, ‘This is where I might as well step up a gear,’” Gillette said.
60s
- Average net worth: $1,675,214 (60-64 years old), $1,836,884 (65-69 years old)
- Median net worth: $394,010 (60-64 years old), $394,300 (65-69 years old)
Average net worth peaked in this decade, approaching $2 million for Americans in their late 60s.
In their 60s, many people retire and begin to draw down the wealth they have accumulated.
“You are asking [people] A switch flips and all of a sudden you start spending money,” Gillette said.
But for wealthy families who have invested for decades, “you’re living off that income,” she says. “I haven’t even mentioned it to the principal.”
70s
- Average net worth: $1,714,085 (70-74 years old), $1,629,256 (75-79 years old)
- Median net worth: $433,100 (70-74 years old), $341,300 (75-79 years old)
In their 70s, Americans finally see their net worth begin to decline.
We’re probably no longer working and our retirement nest egg is slowly being depleted. While many expenditures are down, others, especially health care, are up.
“We’re at a point where we’re cutting back on spending, and we’re going to be taking down 401(k)s rather than adding to them,” Swanberg said.
Want to try CDs? Interest rates on certificates of deposit are the highest in recent years
Wealthy families may still earn more than they spend. With $1.5 million or his $2 million retirement plan, that’s a lot of income. Less wealthy families may rely on Social Security.
Even if you’re nearing your 70s and your net worth doesn’t reach seven figures, you’re not doomed to spend your days in poverty, experts say. “Everyone’s budget is different.”
“How much money you need depends on how much you want to spend,” Swanberg says. “People who have less money than average and spend less can become very wealthy.”