Do you know what your net worth is? If you've calculated your net worth, you might be wondering how you compare to other Americans around the same age. With that in mind, here's a quick rundown of how you can calculate your net worth, what the average 40-year-old is worth, and how to tell if your net worth is where it should be.
What exactly is your net worth?
Net worth is defined as the sum of a person or household's assets minus their liabilities. In other words, if you were to sell everything you own and pay off any debts you have, your net worth would theoretically be the amount of money you would end up with.
So, the first step in calculating your net worth is to add up your assets. This can include your home, your cars, investment accounts (standard brokerage and retirement), collectibles, jewelry, and more. You don't need to add up every asset you own, just the large ones. And for things like the value of your home furnishings, it's fine to use one number to estimate rather than adding everything individually.
Next, add your debts together. Include your mortgage, car loan(s), as well as any credit cards or personal loan debt. Subtracting the two numbers will show your net worth.
As a simplified example, let's say you own a home worth $400,000, a car worth $35,000, and the value of your furnishings and everything else in your home is collectively $65,000. This gives you an asset value of $500,000. We'll say you have a $250,000 mortgage and owe $10,000 on a personal loan. Subtracting $260,000 in debts from $500,000 in assets gives a net worth of $240,000.
The average American's net worth at 40
Of course, the average American's net worth depends on what particular study you're looking at and what the exact methodology they use is.
Having said that, according to the most recent Survey of Consumer Finances, which is conducted every three years by the Federal Reserve, the median net worth of a household in the 35-44 age group is $91,300. However, the average net worth in this age group is $436,200.
We won't get too deep into a statistics lesson, but the general takeaway is that half of households in this age range have a net worth less than $91,200 and half have a net worth greater than this amount. When an average is significantly higher than the median, like it is here, it implies there is a small number of households with extremely high net worth that are skewing the numbers.
Also keep in mind that net worth includes asset values minus any debts. Someone with the median $91,200 net worth could have $91,200 in the bank, rent their home, and have no debt whatsoever. And someone with the exact same net worth could have $2 million in assets but owe more than $1.9 million in mortgage and other debt. In other words, net worth doesn't tell the whole story about a household's financial situation.
What should your net worth be at 40?
The median and average can certainly be smart ways to gauge your progress relative to others in your age group, but there's no single number that every 40-year-old "should" have. There are a lot of variables that play into the equation, such as your income, marital status, number of children, and where you live that can make it easier or more difficult to build net worth.
It's also important to realize that not all debt is the same. For example, if you have $300,000 in assets and a $200,000 mortgage at 3% interest, you are in a very different financial situation than someone with $300,000 in assets and $200,000 in various debts at an average interest rate of 10% or more.
The short answer is if you're prioritizing saving for both retirement and emergencies, keeping your debts at a responsible level, and generally living within your means, your net worth should continue to move in the right direction over time.
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FAQs
According to Scott Lieberman, founder of Touchdown Money, ideally, your net worth should be somewhere around twice your annual salary. Yet, he also conceded that if that number seems daunting, it's important to remember that your net worth is the sum of all of your assets minus all of your debts.
What should my net worth be at age 40? ›
According to Scott Lieberman, founder of Touchdown Money, ideally, your net worth should be somewhere around twice your annual salary. Yet, he also conceded that if that number seems daunting, it's important to remember that your net worth is the sum of all of your assets minus all of your debts.
Is 1 million by 40 good? ›
Retiring at 40 may sound like a pipe dream. But it's entirely within reach if you save $1 million while working. The key elements for achieving this feat are sticking to a budget and implementing a comprehensive retirement strategy.
Where should I be financially at 40? ›
The average retirement savings a person should have at age 40 varies significantly depending on individual circ*mstances, financial goals, and income levels. Many financial experts suggest you should have 3 times your yearly pre-tax salary saved by 40 years old.
How do you answer what is your net worth? ›
To calculate your net worth, you subtract your total liabilities from your total assets. Total assets will include your investments, savings, cash deposits, and any equity that you have in a home, car, or other similar assets. Total liabilities would include any debt, such as student loans and credit card debt.
What is a good income at age 40? ›
The median salary of 35- to 44-year-olds is $1,197 per week or $62,244 per year.
What net worth is rich? ›
A Subjective Concept. While having a net worth of about $2.2 million is seen as the benchmark for being rich in America, it's essential to remember that wealth is a subjective concept. Healthy financial habits and personal perspectives on money are crucial in defining and achieving wealth.
How much should a 40 year old have in a 401k? ›
Fidelity says by age 40, aim to have a multiple of three times your salary saved up. That means if you're earning $75,000, your retirement account balance should be around $225,000 when you turn 40.
Can I retire at 40 with 3 million? ›
Summary. $3 million should be more than enough to fund your retirement, even if you choose to retire early. A number of factors are at play when determining how long $3 million will last, including your investment strategy and retirement lifestyle.
Does net worth include home? ›
Household wealth or net worth is the value of assets owned by every member of the household minus their debt. The terms are used interchangeably in this report. Assets include owned homes, vehicles, financial accounts, retirement accounts, stocks, bonds and mutual funds, and more.
As you reach your 40s and 50s, saving for retirement will become one of your most important goals. As a general rule of thumb, you'll want to have saved three to eight times your annual salary, depending on your age: 40: At least three times your salary. 45: Around four times your salary.
How much savings is ideal by 40? ›
By age 40, your savings goals should be somewhere in the neighborhood of three times that amount. According to 2023 data from the U.S. Bureau of Labor Statistics, the average annual income hovers around $62,000. This means retirement savings goals for 40-somethings should tip the scales at around $200,000.
What is the best investment at the age of 40? ›
Consider opening an individual retirement account (IRA) or a health savings account (HSA). Both can provide an added boost to the quality of your life in retirement — with added tax advantages, too. Don't skip retirement savings to pay for college.
Does a 401k count as net worth? ›
Yes. The value of your 401(k) account is a part of your net worth and should be included in your net worth. Like anything else of financial value, the vested balance of your 401(k) account — or any retirement account, for that matter — is considered an asset.
What is a good net worth to have? ›
Determining what your net worth should be at any age can be a bit tricky, and it depends on your income. Say you're 30 years old and your income is $50,000 per year. Your net worth should be $150,000, according to this formula. A $25,000 salary at age 30 would mean an ideal net worth of $75,000.
What is considered high net worth? ›
What Is a High-Net-Worth Individual (HNWI)? A high-net-worth individual (HNWI) is someone who generally has liquid assets of at least $1 million after accounting for their liabilities. 1 (Liquid assets held by HNWIs include cash and investments that can be easily liquidated or converted to cash, including stocks.)
How much should I be investing at age 40? ›
Ideally, you will invest as much as possible and max out your contributions, but if you need to be more conservative with your initial investments, aim for 20% of your income each month. You can always invest more or less depending on your financial situation throughout the years.
How much money does the average 40-year-old have in the bank? ›
Average Savings By Age
| Age Range | Account Balance |
|---|
| Ages 35-44 | $27,910 |
| Ages 45-54 | $48,200 |
| Ages 55-64 | $57,670 |
| Ages 65-74 | $60,410 |
2 more rowsOnly 5% of millionaires are under 40. Only 1% are 30 or younger. The average age of all millionaires is 62. Don't forget this on your way to financial freedom.
