Net worth can be a more useful way to gauge your financial situation, as it takes your debts into account in addition to the money you've saved. But what is a good net worth to have before you retire? In this article, we'll take a look at what net worth really means, what the average American household's net worth is, and what to keep in mind when assessing your situation.
What does net worth mean?
Net worth is the difference between a person's assets and liabilities. For example, if the value of your home, car, and other possessions is $1 million, and you owe $400,000 in various mortgage, auto loan, and other debts, your net worth is $600,000.
In other words, think of net worth as the amount of money you would have left if you sold everything you own and paid all of your debts.
To calculate your net worth, start by adding the value of your major assets. You can estimate the fair market value of your home and cars, and be sure to consider other valuable items. Include liquid assets like:
Note that you don't need to include every item you own. Other common categories include things like jewelry, art, collectibles, and home furnishings, but there is no set list of the items to include and exclude from net worth.
Then, add up your debts, which is usually a rather straightforward calculation. Add your mortgage and auto loan balances, too. And don't forget about any personal loans, credit card balances, and other debts you may have. Subtract this from the value of your assets to determine your net worth.
The average retiree's net worth in the United States
According to the Federal Reserve's latest Survey of Consumer Finances, which is conducted every three years, here is the average American household's net worth for the three age groups that cover the majority of retirees:
| Head of Household Age | Median Net Worth | Average Net Worth |
|---|
| 55–64 | $212,500 | $1,175,900 |
| 65–74 | $266,400 | $1,217,700 |
| 75 and older | $254,800 | $977,600 |
Data source: Federal Reserve Survey of Consumer Finances.
We won't get too deep into a statistics lesson, but the important thing to know is that the median net worth means that half of households in that age group have a higher net worth, while half are lower. And when the average is significantly higher than the median, as is the case in all three age groups here, it implies that there are some outliers with very high net worth. In a nutshell, the median is generally the better representation of the typical retired household's net worth than the average.
Net worth isn't the only factor in a financially secure retirement
One important point to keep in mind is that net worth isn't the only thing that determines quality of life in retirement. A household with a relatively low net worth could actually have a more secure retirement if they have a pension or other stream of income to cover living expenses, for example.
In a nutshell, the biggest factor in a financially secure retirement (for most households) is income, not net worth. It's true that a large retirement nest egg can be used to create an income stream from investments, but there are other sources to keep in mind, such as pensions, Social Security, annuities, and more.
The bottom line on net worth in retirement
The averages and medians mentioned here can be a good tool to determine where you stand relative to other retirees, but the most important takeaway is that there is no set net worth that you should have by the time you retire. The amount you need to be financially comfortable depends on a variety of factors, such as your other income streams, fixed and variable expenses, and your lifestyle.
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FAQs
By age 40, you should have accumulated three times your current income for retirement. By retirement age, it should be 10 to 12 times your income at that time to be reasonably confident that you'll have enough funds.
What should your net worth be when you retire? ›
Typical Net Worth at Retirement
| Age Range | Median Net Worth | Average Net Worth |
|---|
| 55-64 | $212,500 | $1,175,900 |
| 65-74 | $266,400 | $1,217,700 |
| 75+ | $254,800 | $977,600 |
Mar 27, 2024
To be considered wealthy at age 65 or older, you need a household net worth of $3.2 million, according to finance expert Geoffrey Schmidt, CPA, who used data from the 2019 Survey of Consumer Finances (SCF) to determine the household net worth needed at age 65 or older to determine the various percentiles of wealth in ...
Is $2 million net worth enough to retire? ›
A $2 million nest egg can provide $80,000 of annual income when the principal gives a return of 4%. This estimate is on the conservative side, making $80,000 a solid benchmark for retirement income with this sum of money.
What is a good net retirement income? ›
After analyzing many scenarios, we found that 75% is a good starting point to consider for your income replacement rate. This means that if you make $100,000 shortly before retirement, you can start to plan using the ballpark expectation that you'll need about $75,000 a year to live on in retirement.
What is considered a good amount of money to retire with? ›
By age 35, aim to save one to one-and-a-half times your current salary for retirement. By age 50, that goal is three-and-a-half to six times your salary. By age 60, your retirement savings goal may be six to 11-times your salary. Ranges increase with age to account for a wide variety of incomes and situations.
What percentage of retirees have $3 million dollars? ›
Specifically, those with over $1 million in retirement accounts are in the top 3% of retirees. The Employee Benefit Research Institute (EBRI) estimates that 3.2% of retirees have over $1 million, and a mere 0.1% have $5 million or more, based on data from the Federal Reserve Survey of Consumer Finances.
What net worth is considered upper class? ›
With that in mind, a net worth of $604,900 would put you in the upper 25% of American households and having $1 million or more should make you firmly a member of the upper class. Of course, it's important to remember that net worth is calculated by adding up your assets and then subtracting your liabilities.
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.
What percentage of retirees have a million dollars? ›
If you have more than $1 million saved in retirement accounts, you are in the top 3% of retirees. According to EBRI estimates based on the latest Federal Reserve Survey of Consumer Finances, 3.2% of retirees have over $1 million in their retirement accounts, while just 0.1% have $5 million or more.
Being rich currently means having a net worth of about $2.2 million. However, this number fluctuates over time, and you can measure wealth according to your financial priorities. As a result, healthy financial habits, like spending less than you make, are critical to becoming wealthy, no matter your definition.
Can I retire on $500,000 plus social security? ›
The short answer is yes, $500,000 is enough for many retirees. The question is how that will work out for you. With an income source like Social Security, modes spending, and a bit of good luck, this is feasible. And when two people in your household get Social Security or pension income, it's even easier.
What percentage of retirees have $4 million dollars? ›
According to a 2020 working paper from the Center for Retirement Research at Boston College, the top 1% of retirees—which a retiree with $4 million in assets would fall into—can expect to pay about 22.7% in state and federal taxes.
What is a good net worth to retire? ›
Typical Net Worth at Retirement
| Age Range | Median Net Worth | Average Net Worth |
|---|
| 55-64 | $212,500 | $1,175,900 |
| 65-74 | $266,400 | $1,217,700 |
| 75+ | $254,800 | $977,600 |
Oct 5, 2023
Americans who earned lower-income wages while working will naturally get a lower Social Security check once they retire. As of March 2024, the average retirement benefit was $1,864.52 a month, according to the Social Security Administration.
What does the average American retire with? ›
Data from the Federal Reserve's most recent Survey of Consumer Finances (2022) indicates the median retirement savings account balance for all U.S. families stands at $87,000.
What is good net worth by age? ›
Average net worth by age
| Age by decade | Average net worth | Median net worth |
|---|
| 40s | $713,796 | $126,881 |
| 50s | $1,310,775 | $292,085 |
| 60s | $1,634,724 | $454,489 |
| 70s | $1,588,886 | $378,018 |
4 more rowsAverage and median 401(k) balances by age
| Age range | Average balance | Median balance |
|---|
| 35-44 | $76,354 | $28,318 |
| 45-54 | $142,069 | $48,301 |
| 55-64 | $207,874 | $71,168 |
| 65+ | $232,710 | $70,620 |
2 more rowsMar 13, 2024
If you're naturally frugal and you plan to live a low-key, minimalist lifestyle in retirement then $150,000 might serve you well. On the other hand, if you'd like to enjoy a more lavish lifestyle or you have a serious health issue that results in high out-of-pocket costs, $150,000 may not go that far at all.
How long will $200,000 last in retirement? ›
Summary. Retiring with $200,000 in savings will roughly equate to $15,000 annual income across 20 years. If you choose to retire early, you will need additional savings in order to have a comfortable retirement.
